(Bloomberg) --
Good morning. What next for Italy’s government, Boris Johnson visits Angela Merkel and the Fed minutes kick off a cavalcade of central bank talk. Here’s what’s moving markets.
Conte Departs
Italian government bonds rallied after Prime Minister Giuseppe Conte resigned from the government, as expected, but pushed back against the notion of fresh elections, raising the chance that a new coalition will be sought and at least a degree of the turmoil brought by new polls will be avoided. But Italian stocks didn’t take the news so well, falling yet again as analysts branded the situation a “ total mess.” Whatever the outcome, more uncertainty is on the menu and given investors have already fallen out of love with European stocks, that’s unlikely to help the FTSE MIB.
Boris in Europe
U.K. Prime Minister Boris Johnson is set to visit Germany’s Angela Merkel on Wednesday and France’s Emmanuel Macron a day later as he attempts to garner at least a modicum of support for his plans to renegotiate the current Brexit deal. Those overtures fell on deaf ears with the European Union, which is sticking to its view on the controversial backstop being an essential component of the exit agreement and rebuffing Johnson’s demands to reopen the talks. Beyond that, the U.K. may also wait until after Brexit to name a successor to Mark Carney heading the Bank of England.
Central Bankfest
The first volley of central banking action arrives Wednesday in the form of minutes from the Federal Reserve’s most recent policy meeting, followed Thursday by minutes from the European Central Bank and by the Jackson Hole symposium. But traders are starting to prepare for the possibility that even if Fed Chairman Jerome Powell does signal further easing at his speech on Friday, the overall tone may disappoint. Traders also continue to find ways to play the inverted yield curve, though a Japanese mega fund thinks markets are now so synchronized that managers risk losing on every front.
Lira Slips
It has flown under the radar somewhat this week but Turkey’s lira has taken a hit as the strong dollar catches up with a favored yield play among currency investors. More substantially, traders also appear to be fretting that the central bank – under even more intense pressure than the Fed to cut rates – is taking an easier monetary policy path than anticipated, raising the risk things could overheat again. Along with Argentina, which is pledging to get its currency under control following the spectacular rout in its assets last week, Turkey has moved to the center of emerging-market concerns once again.
Coming Up...
The summer doldrums have well and truly set in for financial markets. Asian stock indexes were mixed on low volumes, with investors in a bit of a holding pattern before the news flow from central banks over the next couple of days. U.S. and European stock-index futures ticked slightly higher after a down day yesterday, when President Donald Trump showed no urgency to resolve trade friction with China and renewed his call for a “big” Federal Reserve rate cut. U.S. crude inventories will arrive later in the day, during a week when the oil price has been fairly steadily holding gains made over the weekend.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Trump has canceled a meeting with Denmark’s leader over Greenland.
- Wall Street apartments are struggling on the market.
- Smart cities need to spend more on cybersecurity.
- The secrets behind some of the world’s craziest cakes.
- Ferries are undergoing a green revolution.
- The sports site haters love to dunk on keeps adding subscribers.
- Robert de Niro files suit against an ex-employee for watching Netflix at work.
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