Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

StockBeat: Greek Markets Surge, Italy's Wobble After EU Election

Published 28/05/2019, 09:36
Updated 28/05/2019, 09:48
© Reuters.

© Reuters.

By Geoffrey Smith

Investing.com -- As the dust settles from elections to the European parliament at the weekend, it becomes clear that the biggest winner has been – Greece.

The Athens General Composite index rose nearly 6% on Monday while Greek government 10-year bonds yields – a rough barometer of political risk – fell to their lowest since the country joined the euro zone in 2002.

The ATG is now up 26% in 2019 to date, and less than 1% off the high for the year that it hit in April. Even so, it’s still down more than two-thirds from its peak before the debt crisis exploded in 2010.

The move came after radical leftist Prime Minister Alexis Tsipras suffered a crushing defeat at the hands of the center-right New Democracy party of Kyriakos Mitsotakis. Tsipras responded by moving up to June national elections that were scheduled for October. That move was seen by analysts as an attempt to forestall four months of drifts that could have led to an even worse defeat.

A year ago, Greece’s 10-year bonds yielded 6.10%. Today they yield only 3.17%. That’s only 47 basis points more than Italy's, which have risen from 2.20% to 2.70% in the same timeframe.

That’s because Greece has been the mirror image of Italy politically. While Greece has given up its revolt against Eurozone budget discipline, Italy – under the populist coalition of Matteo Salvini’s Lega party and Luigi di Maio’s 5 Stars Movement - has declared war on it.

“If we need to break some limits, like the 3% or the 130-140%, we’ll go ahead,” Salvini said while campaigning, in a reference to Eurozone rules that limit budget deficits to 3% of GDP. Italy’s gross public debt is already 132% of GDP, a level that is unlikely to be sustainable if Eurozone interest rates ever rise again. The European Commission recently forecast Italy’s budget gap would hit 3.5% of GDP next year, putting Rome and Brussels clearly on a collision course.

No coincidence, then, that Italy’s FTSE MIB has been the worst performing index in Europe since Sunday, losing 1.1% by 4.30 AM ET (0830 GMT) on Tuesday, while the benchmark Euro Stoxx 600 was down only 0.4%.

U.K. markets reopened mixed after a three-day weekend, the FTSE 100 edging down by less than 0.1%. Germany’s Dax was down 0.6%.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.