The Italian election is the talk of the town, and the FTSE MIB is feeling the pressure. 

Europe

Anti-establishment parties in Italy proved to be very popular with voters, and not so popular with investors. It is looking like there will be a hung parliament, and this is weighing on investor confidence.

The Italian economy has many problems, such as high unemployment and high levels of debt, and major reform is required. The lack of political clarity is sending out the wrong message to dealers. The rise of parties like the League Party and the Five-Start Movement underline the Eurosceptic sentiment in Italy, and investors are spooked as it could be the first step towards Italy’s exit of the euro or the EU.

Smurfit Kappa and DS Smith are in demand after Goldman Sachs listed the two companies on its note covering the packing and paper industry. The Wall Street titan raised its price target for Smurfit Kappa to 3000p from 2700p. Shares in Smurfit Kappa are up 4% at 2536p.

Interserve shares are higher today after it was reported that Emerald Investment Partners are buying up their loans. The troubled services support company has come under pressure because of the fallout of the Carillion collapse. The investment company is reported to own roughly one third of Interserve’s debt, as it has been acquiring it on the secondary market. Interserve are keen to back Interserve’s refinancing, and that would be a great help to the company. Their share price has been falling since 2014, and if it breaks below 53.1p it could target 40p. A break above 124.5p could send the stock to 153p.  

Ultra Electronic have dropped their takeover of Sparton Corp. The two firms stated it was a mutual decision but it didn’t help that the US Department of Justice expressed concerns about the possible deal. Ultra Electronic are clearly keen to expand their market, and the company stated that underlying profits declined by 9.25%. A drop-off in UK defence orders was cited as a reason for the fall. With domestic contracts dwindling, it’s no wonder Ultra Electrons are on the acquisition trail.

US

US equity markets are mixed as talk of possible trade wars are still doing the rounds. President Trump’s announcement last week that the US will start imposing levies on steel and aluminium imports has rattled the markets, as it is likely to be met with a retaliation. The EU has singled out a number of American products which could be hit with a levy. Mr Trump wants to ‘put America first’ but global investors could lose out on the back of it.

Economic sentiment in the US picked up today as the services PMI report and non-ISM manufacturing reports came in at 55.9 and 59.5 respectively, and that compares with the previous reports of 53.3 and 59.9 respectively.

FX

GBP/USD is higher today after the UK revealed respectable services results. The UK services sector PMI reading for February came in at 54.5, an improvement on the January report of 53, and it comfortably exceeded economists’ expectations of 53.3. In recent weeks it may have lost some ground, but it is still on an upward trend from March last year.

EUR/USD has been hit by the cooling of the service sector in the eurozone and the rise of Eurosceptic parties in Italy. The services sectors in Italy, Germany and France all grew at a slower pace in February and missed forecasts.  

Commodities

Gold is largely unchanged today as the firmer US dollar has curtailed the metal. Gold has maintained the gains it racked up on Friday in the wake of the trade war chatter. The flight to quality effect has come back into play for gold. This week the possible political rumblings in relation to Trump’s tariffs are likely to be the main driver of gold.

WTI and Brent Crude oil have bounced back after a negative move last week. Traders are worried about over supply as the US is now producing oil at record levels, but if the oil market can hold above the February lows it could resume the wider upward trend that has been in place since June last year.

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