By Sara Sjolin, MarketWatch
Conte was proposed as prime minister by the coalition of 5 Star Movement and League, which now stand to take power and make Italy the largest country in Europe to be led by an antiestablishment government.
The two parties are already on a collision course with the EU, having promised to challenge Brussels’s budget guidelines and rules on immigration.They have also vowed to increase fiscal spending and cut taxes — moves some worry could throw the Italian economy into disarray and create a new sovereign debt crisis.
What are strategists saying?
“We see two opposing forces impacting Italian and, by extension, euro-area assets. The slow-burning force is the deepening of the growth cycle, which is helping the balance sheet of the Italian economy to improve, boosting the performance of riskier asset classes,” analysts at UBS said in a note.
“The faster-moving force is the ebb and flow in political risk premium. Our working assumption has been that risk premium would not escalate dramatically enough to derail the positive impact from stronger growth. The events of the last few days in Italy have questioned our views. It is still early to shift camps. Yet it is high time to stress-test key assets and trades to levels of escalation in Italian risk premia,” they added.
The yield on 10-year Italian government bonds /zigman2/quotes/211347230/realtime BX:TMBMKIT-10Y -1.81% fell 2 basis points to 2.395% on Thursday.
Shares of Deutsche Bank AG /zigman2/quotes/205584254/delayed DE:DBK +0.70% /zigman2/quotes/203042512/composite DB +0.49% fell 4.8% as critics demanded the resignation of Chairman Paul Achleitner at the bank’s annual general meeting.
Shares of Aryzta AG /zigman2/quotes/206947852/delayed CH:ARYN +4.90% plunged 27% after the Swiss bakery group reported a 17% drop in third-quarter revenue and lowered its full-year guidance.
Mediclinic International PLC /zigman2/quotes/201361237/delayed UK:MDC +2.28% lost 9.4% after the health care group said it swung to a full-year pretax loss due to one-time charges related to its Switzerland business and intangible assets.
United Utilities Group PLC gave up 1.1% after reporting a 2.4% fall in fiscal 2018 pretax profit.