Investment Note 18th May 2018

Populist coalition is agreed in Italy


A new Italian coalition agreement has been announced today, binding the alternative Five-Star Movement and far-right League parties into forming a government. Whilst details of the agreement have been announced, and with fewer controversial elements than might have been expected, a Prime Minister is yet to be announced. Agreed policies focus on internal tax reform and plans to seek stronger EU immigration policy input, though no mention was given to seeking the cancellation of ECB debt or plans for a referendum or exit from the Euro. Market reaction has been largely limited to Italy, with Italian financials stocks taking the largest hit and Italian government debt selling off. The FTSE MIB (Italy's primary stock index) is down around 1 per cent, whilst the wider Eurostoxx 50, the broad measure of European stocks, is up marginally as details of the deal were less extreme than some might have feared. European government debt is being bought, further underlining the contrast.

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