Asian Socks Slide As Italy Vote Looks Headed For Hung Parliament
- Asian stocks were generally lower
- Italy’s election brought yet another hung parliament to a Western democracy
- The Euro was surprisingly steady
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Asian stocks were lower Monday as political uncertainties bedeviled investors.
China’s annual National People’s Congress kicked off in Beijing, with the country’s leadership committing to growth of ‘around 6.5%’ this year. Significantly there was no repeat of the ‘6.5% or better’ tag applied in 2017, suggesting that stability is now at least as important as economic expansion for the world’s second-largest economy. Substantial increases to defense expenditure are also planned.
The main political story was Italy’s general election, which remained under way as Asian trade played out. Exit polls and projections suggest that populist parties have done well at the expense of more traditional groupings but that the Italian Parliament will be hung (no overall majority for anyone), with the centre right as the biggest bloc. There could now be a euroskeptic coalition in charge of the country, which may challenge budgetary restraint and bloc further European integration. There may also be new elections quite swiftly though, if an unbreakable deadlock ensues.
For all that the Euro itself was quite stable through the Asian session. It got some support from another political story, that playing out in Germany where the Social Democratic Party backed another coalition deal with Chancellor Angela Merkel’s conservatives. The Nikkei 225 meanwhile fell by 0.6%, with Australia’s ASX 200 down by a similar amount and all other major indexes showing read as their closes approached.
Gold prices got a boost from those Italian elections and worries about increased global protectionism in the wake of last week’s US decision to increase tariffs on steel and aluminum. Crude oil prices rose before an impending meeting between the traditional producers of OPEC and US shale firms.
The rest of Monday’s session will bring Purchasing Managers Index data from around Europe and the US, along with the similar non-manufacturing and composite indexes from the Institute for Supply Management.
--- Written by David Cottle, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.