Italian Election Results In Political Gridlock
Italian politics are famed for being messy and Sunday’s election was result was no different. As the exit polls continue to roll in, results point to political gridlock and no outright winner for Italy, Europe’s third largest economy.
In a campaign where discontent over immigration featured as a central focus, voters aligned with anti-establish and far right parties in record numbers, choosing to desert the ruling centre left in a show of anger over mass immigration.
Exit polls by Rai state television show that centre-right alliance, which includes returning candidate Silvio Berlusconi’s party Forza Italia, are in line to win 33% - 36% of the votes, although they failed to win an outright majority of 40% required. Forza Italia are expected to have won 14% and the same quantity of votes to be apportioned to Lega Norte, a far-right anti-establishment Eurosceptic party.
The same poll also shows that Italy’s 5 Star anti-establishment party would be the largest single party winning between 29%-32% of the votes. Although they received fewer votes than the centre-right alliance, the party has picked up a strong following in a very short period of time, from their beginnings in 2009.
Whilst this party doesn’t fall neatly into any political category, it’s anti-establishment stance has fed off general disconnect in Italy. Although it has toned its anti-EU/ euro position in exchange for a more business friendly approach leading towards the election in order to boosts its popularity.
Finally, Italy’s ruling centre left coalition is expected to fall in third place.
Initial market reaction:
The euro initially spiked higher on the market open, hitting a peak of $1.2365 versus the dollar, before quickly paring gains and trading in negative territory, all within the first hour of trading. Meanwhile EUR/GBP followed a similar pattern surrendering the pop higher early on.
The Italian FTSE MIB futures are trading considerably lower than its European counterparts, pointing to a 0.8% loss on the open at the time of writing. It is not that surprising that there was no decisive conclusion to the elections and that Italy is pointing towards a hung parliament.
However, the reality that 5 Star may be able to form a coalition with Lega Norte is sending a chill down the markets’ spine.
The fact that the FTSE MIB is showing a bigger reaction than the euro suggests that the markets aren’t overly concerned of a Eurosceptic drive, but are initially seeing this as more of a domestic issue.
Parliament is not due to meet for the first time until 23rd March, with any formal talks on forming a government not to start until April. This will leave Italy in a political vacuum potentially for some time, which is unlikely to work in favour of the fragile, recovering economy.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024