Italy Election and It's Impact on Global financial Market

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.

Italy’s lower house to go to Bersani coalition: View On Currency

A left-wing coalition led by Pier Luigi Bersani looked set to win the lower house of the Italian parliament with a tiny majority, but an impasse appeared likely for the upper house. Meanwhile, coalition led by departing Prime Minister Mario Monti was reportedly expected to take about 10% of the upper- and lower-house votes. U.S. stocks fell sharply on Monday, with the Dow Jones Industrial Average having its worst session this year. The euro continued to suffer Monday, with a sell-off in the shared currency triggered after questions about Italy's austerity reforms emerged in the wake of the country's general election. The euro EURJPY +0.3619% late Monday in New York sank 4% against the Japanese yen, Against the dollar EURUSD +0.0566% , the euro fell 1.1% to $1.3076,Brent also fell to $113.31,whereas Gold rise by 0.79% from Friday closing @$1592.20. With dollax is quoting higher at 81.80, Indian Rupee can lose some gains it made in previous session, however support may come around 54.27.In morning session today partially converted rupee open at 54.07 against Dollar.

Complied by Amit Daga with Inputs from Marketwatch.

Read the Disclaimer Posted earlier in Blogger's Post.

Weekly Rupee Outlook 25th Feb: Bullish On chart

On Weekly chart in candlestick pattern Rupee likely to find support around 54.27 and resistance around 53.81.Techincal Chart Reading suggest rupee is taking support near to lower band trend line. Rupee likely to get strengthen towards 52.89 in coming days or by next week. On the support side rupee finds first support around 54.27 and 54.50 as second support, in extreme bearish condition rupee may breach up to 54.85 as per chart suggesting to upper channel range. In a broader sense rupee is more likely to gain first towards 53.81 and 53.50 in this week. Ideally rupee is targeting towards 52.89 in coming days. One can be bearish on rupee only after it breach sway beyond 54.67 and hold the fall in market, still the view suggest remaining bullish on rupee for the week.

Last Week our technical outlook on rupee and the range went almost correct. Lots of news and action happen last week across the globe and financial instruments. Rupee lost to 54.62 and made a low of 54.02 and close at 54.18. Last week after substantially rupee get support from couple of factors as inflows related to TPG Capital's $305 million stake sale in Indian commercial vehicle financier Shriram Transport Finance Co Ltd and foreign fund-related dollar inflows from banks, which were bunched up as trading was thin on Wednesday & Thursday due to a two-day national strike, which kept most dealers at state-run banks away, as cited by inter-bank forex dealer. Last week we saw two altered views from FED & BOE minutes that released on Wednesday, Minutes of the Federal Reserve’s January meeting released Wednesday reveal that many Fed officials are worried about the costs and risks arising from the $85 billion–per–month asset-purchase program. And they all seem to have their own ideas on how to proceed, whereas BOE. The notes from the meeting show that three of the nine committee members are now in favour of injecting more cash into the UK economy, compared to only one member in January. Mr. King, Paul Fisher and David Miles voted to increase the size of the BOE's bond-buying stimulus program by £25 billion ($38.7 billion) to £400 billion, saying further asset purchases would help the U.K. economy expand without stoking inflation.

GBP trembled near to its two year low and continue to fall further after BOE minutes suggest weaker economy, On Friday Moody’s rating cut on British bonds from its triple A to one notch Aa1 also hit a big blow to pound later in Friday evening. Across the globe commodity dropped by more than 3% and gold made lowest point in last six months. Brent also lost more than $3.5 and trading below the comfortable low of $114.Dollar Index touch its three month high at 81.58.

Key indicators suggest that Asian and European economy may do well in coming months, and major equity indices are still looking positive on technical charts. Rupee may find support from local factors, Brent oil prices and with Budget session on the minds of every investor the coming week could see more volatility and support from FII in flows as suggested rise in CBOE volatility index indicates more yet to come in coming week with mounting volatility in market.

Complied By Amit Daga.

Disclaimer : Please read the disclaimer posted earlier in the blogger's Post.

Pound Likely to fall below 1.5011 level,after BOE minutes and technical sell-off

On weekly Timeframe in Candlestick chart pattern, GBP looks bearish.GBP breached 4Y support line around 1.56477 last week, it continue with the fall and cut deep below to its trend support line of 1.52715 which was giving enormous technical support to GBP in last two years, it also reverse the trend three time bottom-out and five time reversal from near to 1.52715 levels. However this time GBP can go down well below to 1.50355 and can stop near to 1.49025.On Technical chart indicator are suggesting oversold RSI is near to 35 and prices are way below to its 200 EMA and 50 EMA, but still a slight correction towards 1.53017 can correct RSI levels and pound can fall from that. Ideally GBP can go down below to 1.48995 and likely to stop the current correction in prices due to several technical and fundamental reasons. Ideal resistance would be 1.54760 and 1.53106 can treated as trend line resistance for short term. Support on technical charts seems to be around 1.50335 and thereafter 1.48758.

On fundamental side The Bank of England minutes seemed to indicate that the MPC were ready to add additional stimulus if warranted and then a mixed bag in the jobs market with unemployment climbing to 7.8% matching the US with claimant count coming in better than expected. Minutes from the BoE’s latest policy meeting have sparked fears of the effect that more QE would have on the economy, which is already bracing itself against the threat of a triple-dip recession. The notes from the meeting show that three of the nine committee members are now in favour of injecting more cash into the UK economy, compared to only one member in January. Mr. King, Paul Fisher and David Miles voted to increase the size of the BOE's bond-buying stimulus program by £25 billion ($38.7 billion) to £400 billion, saying further asset purchases would help the U.K. economy expand without stoking inflation. In London last week, the BOE raised its inflation forecasts. However, those opposed to additional bond purchases discussed alternative ways to stimulate the economy, such as encouraging greater lending, the meeting minutes showed.

 The minutes of the Bank of England’s February meeting struck a dovish tone, fuelling fears over the possibility of more easing by the central bank. Minutes from the Bank of England's last policy meeting showed growing support for more stimulus to boost the U.K.'s flagging economy. "Today's minutes caught a lot of people off guard because the BOE has previously tried to distance itself from more quantitative easing as it was pushing up inflation," said Paul Robson, European head of FX strategy at the RBS.

The pound has been one of the worst-performing currencies this year. As the euro zone's debt crisis has subsided, sterling's appeal as a haven alternative to the euro has dimmed. Investors instead have focused on the quandary facing the U.K.'s central bank and its political leaders—how to stimulate weak growth without further fuelling stubbornly high inflation.