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Daily Archives: 30th September 2018

30th September 2018

🇮🇹 Here we go again!!

MARKET CLOSE:
iTraxx Main

68.2bp, +1.1bp

iTraxx X-Over

273bp, +5.9bp

🇩🇪 10 Yr Bund

0.47%, -6bp

iBoxx Corp IG

B+130.6bp, +1bp

iBoxx Corp HY

B+385.6bp, +9bp

🇺🇸 10 Yr US T-Bond

3.04%, -1bp

🇬🇧 FTSE 100

6026.94, ERROR
🇩🇪 DAX

12591.68, ERROR
🇺🇸 S&P 500

3349.16, -4.38

Mamma mia… routed…

The markets were well-shaken out of their complacency during a torrid final session of the third quarter. Up until that point (just about), the markets had managed to swat aside the many potential banana skins which had come their way. They have learned to live with Trump, good levels of economic growth in the US have boosted sentiment and helped US equities to record levels, while Turkey succumbed to an orthodox economic policy response to help support its currency.

Events were rumbling for a few days around the Italian budget with rumours of the resignation of the technocratic finance minister before finally we had the populist parties make good on some of their (election) promises. As the fiscal sluice gates opened, the market fretted. And a decent/good month for risk assets turned into a flat/poor one.

At the worst point, Italian stocks fell by around 5% (closed 3.4% lower), the DAX stumbled and then tumbled by as much as 1.8% (ended 1.5% down), BTPs were hammered  (10-year yield rose as much as 37bp) while safe-havens alone were in the ascendancy.

So the markets were feeling soggy and some would suggest that, in reality, they will settle – as it is just an Italian problem. Unfortunately, these events can sometimes spiral out of control – and it might not be only an “Italian problem” for too much longer. The EU will be watching.

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