A general election took place on 24–25 February 2013 to determine the 630 members of the Italian Chamber of Deputies and the 315 elective members of the Senate for the 17th Parliament of the Italian Republic. The current election system is a form of party-list proportional representation with a series of thresholds to encourage parties to form coalitions. Italy is divided into 26 districts for the Chamber of Deputies and 20 regions for the Senate.
‘Ungovernable’ Italy: Debt crisis back on table. More market turmoil as investors deal with ‘worst-case’ outcome.
Italian voters rejected outgoing Prime Minister Mario Monti’s austerity prescription, with an inconclusive result to parliamentary elections in Europe’s third-largest economy setting the stage for a second day of market turmoil Tuesday. Yields on Italian government bonds soared while European equities tanked and the euro threatened to take out its January low versus the dollar. U.S. stock index futures traded higher, however, a day after initial Italian-election results helped spark the biggest one-day drop in the Dow Jones Industrial Average DJIA -1.55% this year.
“Italy is headed to new elections within six months as election results make Italy ungovernable. It is political, economic [and] financial chaos,” said economist Nouriel Roubini on Twitter.
Official results gave Democratic Party leader Pier Luigi Bersani’s center-left alliance a tiny win in the lower house, while no party or alliance won enough votes to form a majority in the Senate. A new party that Monti formed lagged expectations, finishing fourth. Former Prime Minister Silvio Berlusconi’s center-right alliance narrowly missed winning enough votes to form a majority in the Senate. With neither Grillo nor Berlusconi appearing eager to team up, a large coalition seems unlikely, said strategists at Royal Bank of Scotland. Another technocratic government also appears unlikely after Monti’s 14-month unelected reign, making a new round of elections in coming months the most likely outcome, they said. The yield on Italy’s 10-year government bond IT:10YR_ITA +6.29% was up 0.26 percentage point at 4.71% after trading as high as 4.81%, according to FactSet, its highest level since November. Italian government bonds handed investors a return of 11 percent in the past year through Feb. 22, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The euro EURUSD +0.27% dipped as low as $1.3016 but changed hands in recent action at $1.3077. The Stoxx 600 Europe Index XX:SXXP -1.09% fell 1.1% Tuesday, while Italy’s benchmark FTSE MIB index XX:FTSEMIB -4.97% dropped nearly 3%. The drama “proved that the past 14 months have been one long holiday in the drama that is Italian politics, and for the single currency, it was a strong wake-up call,” said Simon Smith, chief economist at FxPro in London. The ICE dollar index DXY -0.23% , which measures the greenback against six major global currencies, rose to 81.799 from 81.766, reflecting investor risk aversion. The CBOE Volatility Index VIX +34.02% jumped Monday as U.S. stocks sold off broadly and concerns rose about political stability in Europe. Gold futures moved closer to the key psychological level of $1,600 an ounce on Tuesday, finding some safe-haven support after Italy’s general election looked set for an inconclusive result and with stocks in Europe and Asia tumbling. The precious metal tends to benefit in times of political and economic uncertainty, and with nearly all votes from the Italian election counted, the results indicated political deadlock. The Sensex fell more than 1 percent to its lowest close in three months on Tuesday Falls tracked a sell-off in global equities as investors feared a resurgence of the euro zone debt crisis after Italy's inconclusive election results. The Nifty ended down 1.6 percent, provisionally posting its biggest daily percentage fall since July 23, 2012.
USD/INR drops from week-high as investors lose their appetite for risk Rupee extends falls on share losses; oil demand.The rupee extends losses to 54.21 versus its previous close of 53.8650/8750 on the back of sharp losses in the domestic share market amid a global risk-off mood Traders say dollar demand from oil firms looking to meet month-end import commitments is also helping the pair.
“The political situation across Europe is effectively a race between austerity and reforms on the one hand and the rise of populist movements on the other,” said Alberto Gallo, head of European macro credit research at Royal Bank of Scotland Group Plc. “Austerity is painful, and if reforms are not implemented in time, you run the risk of social unrest and populism. It hasn’t happened so far in Greece, it hasn’t happened in Portugal or Spain, but we are very close in Italy.”
View: After Italian parliament election result come out we expect more volatility in currency market and global equity market. We could Expect Dollax maintain below 82 level, and Yen may touch 90.70, Indian Rupee can see more volatility on account of Budget event week, and take clue from global outlook, equity market likely to track on global trend, and if it bleeds further we could see some pressure on rupee towards downside, still we kept the view of 54.87 on the very bearish side and maintain rupee on better local equity market can move towards 53.50. In short Volatility will play the market in near term for at least next couple of days.
Complied By Amit Daga with inputs from Marketwatch & Reuters.
Pls Read the disclaimer posted earlier in blogger's post.
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