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Euro break-up index rises as investors fret about Italy - Sentix

01 Juin 2018

Italy's president just gave the green light to the country's prime minister-designate to create a new government.

The new premier is to be sworn in today, after receiving the mandate to form a government by Italian President Sergio Mattarella.

There was no immediate indication from the League on the prospects of success. Cottarelli had been expected to announce his stopgap government's cabinet after those talks. All major parties, except for the ruling People's Party, are calling for Rajoy to step down.

"It would be best to go to elections as quickly as possible, as early as July", said Andrea Marcucci, senate leader for the centre-left Democratic Party.

Stocks skidded as Italy heads for another round of elections that investors worry could become a referendum on whether to stay in the euro bloc.

In another sign that investors were flocking to safer bets, the euro hit a 11-month low versus the yen and fresh 6-1/2 low against the Swiss franc Elsewhere in bonds, U.S. 10-year Treasury yields were at six-week lows at 2.883 per cent after a United States holiday on Monday.

Analysts will next focus their attention on USA inflation data due later in the week which could provide clues to future interest rate rises ahead of the Federal Reserve policy meeting next month.

National Australia Bank said in a commentary: "Fears of a euro existential crisis are gathering momentum amid simmering political turmoil in Italy".

After the appointment as finance minister of Mr Savona was vetoed by President Mattarella, triggering a political crisis that threw markets and the country into chaos, Mr Savona has been chosen as European Affairs minister. Bond prices are climbing and yields are plunging, while the euro fell to its lowest level against the dollar in nearly a year.

Arguing it is "time to abandon many taboos" on the euro, he also said it is now necessary to find "alternative solutions" to how the eurozone is being regulated. French President Emmanuel Macron defended what he called Mattarella's courage and German Chancellor Angela Merkel spoke of the need to obey rules governing the euro. Morgan Stanley Chief Executive Officer James Gorman said the Fed is unlikely to be dissuaded from pursuing its path of monetary tightening as a result of recent volatility in financial markets. "But I no longer accept that everything which is going wrong in South of Italy, in Mezzogiorno, is explained by the fact that the EU or the European Commission would not do enough", he said after leaving a meeting in Brussels. "We are there to serve them, not to lecture them".

Salvini, for his part, was said to be looking at criticism from his voters about his perceived unwillingness to join a government and instead bank on benefitting from a surge in support in fresh elections.

The Mexican peso hit a 15-month low of 20.050 to the dollar on Thursday and last stood at 19.85 per dollar.

Within the final elections, in March, populist events skeptical of European establishments gained a snug majority of seats in parliament, however included each right-wing and left-wing events which have struggled since then to kind a coalition.

Euro break-up index rises as investors fret about Italy - Sentix