Talks of parallel currency gets bigger again in Italy after last weekend Berlusconi interview.
Following Citi , more than 2/3 of italian voters would support anti EUR parties.
The 3 right & centre rights parties will finalise a common program in september likely including parallel currency project.
Risk of Italy (even if low) going this way totally underestimated by FOREX markets but Italian Bonds have started to react negatively with Bund/BTP spread up 20 bps in the last week.
See more details in FT’ link here below :
Italy + ECB obviously not wanting to see EURO above 1,20 + ECB potential tapering discussion in september already in EUR price + more dovish Fed priced as well = EURO/USD to correct from current 1,18 to 1,20 range is becoming more and more likely.
The performance spread between SP500 and Eurostoxx50 is around 15% year to date in favour SP500. The main culprits for poor returns in europe are poor performances of Italy (FTSE MIB down 25%/ big impact of financial sector ) and Portugal down 16%. On the sector side, Stoxx 600 Insurance is down nearly 20%, Stoxx 600 Automobile and Stoxx 600 Telecoms are both down more than 16% .
With higher rates in US and weakening EUR around the corner we should attend a catch up of European markets vs US in the next months . The abovementionned underperformers will have a good chance to perform well on a relative basis. We will keep you informed.