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LGT Navigator: Italian government on the brink

August 9, 2019

After League party leader and Italian deputy Prime Minister Matteo Salvini called for snap elections and threatened to pull the plug on Italy's ruling coalition, Prime Minister Conte made clear that he will not leave office without fighting.


Salvini pointed out that the government no longer has a majority. Polls for Salvini's League party approached 40%, allowing it to govern on its own. He is trying to capitalize the advance of his polling numbers over the past year. He states that his League party has grown frustrated by the constant fighting with their coalition partners, the Five Star Movement. Prime Minister Conte countered that Salvini has no decision power when to hold a parliament confidence vote and that he will not let his opponent dictate the pace of events. An eventual general election would probably take place in autumn, ironically at the same time of the 2020 budget negotiations with the European Union. But as Italy's parliament is currently in recess, it's not clear when or whether the crisis would be made official.

US job market remains strong

The recent decline in weekly jobless claims in the US suggests that the labor market remains surprisingly stable despite cooling global demand and trade tensions. The official unemployment rate of 3.7% is close to the full employment lows of the 1990s. Since the labor market is regarded as an early indicator of impending weaknesses in economic performance, the latest employment figures alone paint a still positive picture of the US economy.

ECB fears slowdown in the euro area

In its economic report, the European Central Bank (ECB) takes a worried look at economic developments as trade disputes intensify. Other concerns were the increasing risk of protectionism and continued geopolitical uncertainty. Survey results point to weaker economic growth in the second and third quarters. In such an environment, inflationary pressure would also remain subdued. Therefore, from the ECB's point of view, a considerable degree of expansionary monetary policy is still necessary. Due to increased economic concerns, the currency authority has indicated the possibility of further interest rate cuts in July. Meanwhile, interest rates should be kept stable until mid-2020. A reopening of bond purchases is still an option.



Economic Indicators August 9

MEZ Country Indicator Last
03:30 CN Producer Prices (y/y) 0.0
03:30 CN Consumer Prices (y/y) 2.7
08:00 DE Exports (m/m) 1.1
08:00 DE Imports (m/m) -0.5
08:00 DE Trade Balance (NSA) 20.6
08:45 FR Industrial Production (y/y) 4.0
10:30 GB Industrial Production (y/y) 0.9
11:00 IT Consumer Prices (y/y) 0.4
14:30 US Producer Prices (y/y) 1.7
14:30 US Core Producer Prices (y/y) 2.3

Earnings Calendar August 9

Country Corporate Period
DK Novo Nordisk Q2



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Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%