Hopes of a resolution to Italy’s political crisis calm nerves, but investors remain cautious over Spain and US tariffs on EU
Eurozone inflation is expected to move sharply higher, partly due to the recent surge in oil prices. UniCredit economists said:
We expect headline inflation to rebound strongly in May, from 1.2% to 1.8% year on year. We see two main drivers: a rebound in core inflation and a jump in energy prices. Core inflation probably reversed its April drop and rose to 1.1% year on year from 0.7%. This would reflect normalization in the price of holiday-sensitive items, with the April reading having been distorted to the downside by the early timing of Easter. Surging oil prices are likely to push energy prices up strongly, adding 0.3 percentage points to headline inflation .
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Optimism that the Italian political crisis can be resolved without new elections is expected to see markets continue their revival today. The 5 Star and Lega parties are making renewed efforts to form a coalition, which has eased fears that a new vote could give a mandate for the country to leave the euro – Italexit or Quitaly, take your pick.
[Market] optimism was reinforced by a call from the Five Star movement for Paolo Savona to withdraw his candidacy for the position of finance minister. This would appear to be at odds with the position of the League and its leader Matteo Salvini, whose pick Savona is. The differences of opinion between the two parties certainly don’t bode well for any future relationship in government, if Salvini does change his mind about Savona and put someone else forward as finance minister…
Even though investors have significant concerns about the recent steep rise in Italian borrowing costs it should be noted they still remain well below their long-term averages prior to the financial crisis, when they were on average in and around the 4% level for most of the noughties. This means that while Italian borrowing costs now are high relative to the last few years, they still remain low by historical standards.
Tight supply and subdued demand are the key contributors to the ongoing limbo gripping the UK property market. A lethargic economy populated by cautious and squeezed consumers has created a property market lacking both momentum and direction.
The time is right for me to step aside. Today’s results clear the way for the new approach sought by our Chairman and the Board.