As expected, EUR continues to crash and DXY to launch:
AUD was whacked versus DMs ex-EUR but held up well all things considered. JPY is taking off, a bad sign for markets:
EMs did worse:
Compounding EM issues, the Chinese yuan has broken lower:
Gold held on:
Oil kept falling:
Base metals eased. They ought to be falling as well:
Just like big miners:
EM stocks were burned and that chart is horrible:
Junk was sold:
Treasuries were panic bid:
And bunds:
As Italian debt went up in flames:
Stocks took it in the neck:
The Italian (and EUR) crisis is accelerating. Via the FT:
The global sell-off came as Italy’s political class continued to struggle to steer a steady path towards new elections after Sergio Mattarella, Italy’s president, vetoed the selection of a Eurosceptic finance minister by the nascent government of two populist parties, leading to the collapse of their new coalition at the weekend.
Carlo Cottarelli, a former IMF official named caretaker prime minister, was expected to present a list of ministers to Mr Mattarella on Tuesday evening, but left a meeting at the Quirinal Palace without making a statement, suggesting there was trouble brewing with the launch of the technocratic administration.
That could trigger immediate elections, rather than a more orderly campaign for a vote in the autumn.
Mr Cottarelli was not expected to win a vote of confidence because of opposition from the two populist parties that hold sway over the current parliament, the anti-establishment Five Star Movement and the far-right League, which continue to hold leads in national opinion polling.“For the first time in history we will have a government that does not have the support of the people or the parliament,” said Luigi Di Maio, the Five Star leader. “It’s shameful, this will be an anti-Italian government occupying the institutions.”
It looks very likely that Ms5 and the League will simply win more of the vote (green and yellow):
As Bloomie says, what’s at stake is simple:
Italy’s Democratic Party signaled a return to campaign mode as it charged its rivals, the League and the Five Star Movement, with having prepared a plan to pull the country out of the euro if they had succeeded in forming a government together.
The two parties gambled with the country’s well-being “with a project to take Italy out of the euro zone, and they did it in a ruthless way,” acting PD leader Maurizio Martina wrote on Twitter. League head Matteo Salvini and Five Star chief Luigi Di Maio have both denied any plan to leave the eur0.
The charges from the PD leader are an early broadside in what’s shaping up to be a new electoral campaign with the dividing line running through Italy’s European future.
Italian politics is the definition of chaos but things getting worse before they get better has to now be the base case. That means an accelerating Italian debt sell-off and ongoing weak EUR, rising DXY and trouble in EMs with commodity prices next in line for the chop. If worst cases transpire, the issuance of Italy’s mini-BOT pseudo-currency and a defacto slide out of the Eurozone will be accompanied by:
- a possibly fatal crash in the EUR;
- a roaring USD which will toxify emerging markets;
- wholesale funding costs rocketing worldwide, choking Australian banks;
- crashing commodities and AUD, plus
- global recession.
David Llewellyn-Smith is the chief strategist at the MB Fund which offers two options to benefit from a falling AUD so he is definitely talking his book. The first option is to use the MB Fund International Stocks Portfolio which is always 100% long as a part of your own asset allocation mix. The second option is to use an MB Fund tactical allocation in which we choose the asset mix for you, including exclusively international stocks, but with bonds and other assets as well to ensure a more conservative mix.
The recent performance of both is below:
The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance.
