It felt like one step forward, two steps back for Italy this week, as its two populist political parties – the League and Five Star Movement – persisted in their attempts to form a “neutral” coalition government.
After more than three months in administrative limbo, things were looking up until President Mattarella vetoed their choice of finance minister – Eurosceptic Paolo Savona. His intervention effectively blocked the two parties joining forces and sparked outrage from supporters in both camps, with calls for the President to be impeached. Where have we heard that before?
So another day, another deadlock, which markets did not like. Italian equities sold off and government bond yields surged to 2012 Greek-crisis levels. The Italian banks, already struggling to get back on their feet, were hit hard and some face the threat of ratings downgrades.
By the end of the week, however, the political machinations had taken on an entirely different complexion and some calm was restored. After the low-key ‘exit stage left’ of Mr Savona, the two parties revived their coalition plans, proposing Giuseppe Conte as Prime Minister for the second time in eight days. Mr Conte, having again accepted the President’s mandate to lead the country, presented a list of new, more palatable candidates for the key finance job, from which economics professor Giovanni Tria emerged victorious.
So it looks like Italy’s current political impasse may have passed, with the new government sworn in on Friday. However, investors will likely remain cautious on what’s to come from Italy’s first populist Eurosceptic coalition. We watch and wait.
US tests EU’s metal
Not content with just the one trade war on his hands, President Trump has provoked anger from so-called “friendly” countries with his latest protectionist measures. Having previously granted a temporary ‘stay of execution’ to major trading partners the EU, Mexico and Canada on metal import tariffs, trade talks failed to secure a permanent exemption. So, with effect from 1 June, imports to the US of steel and aluminium now face duties of 25% and 10%, respectively.
In retort, Uncle Sam’s vexed trading partners have subsequently threatened retaliation by hitting the US where it hurts – in its blue jeans, bourbon whiskey and Harley-Davidson motorbikes.
A tasty treat for sandwich maker’s staff
You might have noticed the staff in Pret A Manger just that little bit perkier this week when serving your lunch. The soup and sandwich maker, currently owned by private equity firm Bridgepoint, has been bought by JAB Holdings in a deal reported to be worth £1.5bn. When the deal is concluded, every staff member has been promised a £1,000 bonus.
Elsewhere, after a near two-year courtship fraught with knockbacks and wrangles, German pharma and chemicals giant Bayer has finally crossed the last hurdle in its proposed takeover of US agriculture firm Monsanto. Like any relationship, there has been give and take. Bayer had to agree to give up a $9bn chunk of its assets before US antitrust authorities could approve the union – the “largest merger divestiture ever required by the United States”. Similar competition concerns had to also be allayed for European authorities to give their blessing. With the deal almost sealed, we wonder if there has been a more attractive US/German coupling since Andre Agassi and Steffi Graf?
Given the week’s not inconsiderable drama, markets were unsurprisingly weak. To the close on Thursday, the FTSE World Europe (ex-UK) had lost 2.2%, while the FTSE 100 and S&P 500 indices were 0.6% and 0.5% lower respectively.
It would appear that President Trump has more than one ‘special’ Kim in his life. Demurely suited but still stilettoed, the seemingly ubiquitous Kim Kardashian West visited the Oval Office on Wednesday to discuss prison reform and sentencing. Indeed.
The two prolific tweeters issued positive posts afterwards. Could KKW, a former supporter of Hillary Clinton, be following husband Kanye’s lead and warming to Mr Trump?
Not forgetting the President’s other Kim, fresh negotiations for a North Korea/US summit in June were said by Secretary of State Mike Pompeo to be “moving in the right direction”. He enjoyed a lavish dinner date with Kim-Jong-un’s Vice Chairman, Gen Kim Yong-chol, in New York this week.
Perhaps familiar with Albert Einstein’s view that “an empty stomach is not a good political advisor,” the two men are said to have enjoyed steak, sweetcorn and cheese, washed down with Islay Malt Whisky.
With such convivial interactions, we could see the historic rendezvous back on the table. Who knows what might be on that menu…
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