Eurozone inflation jumps higher on oil price spike

Javier Stokes
June 2, 2018

Relations between Rome and Brussels got off to a bad start.

Conte was the consensus pick as economic minister of the coalition between the anti-establishment Five Star Movement and the anti-immigration League-a coalition of two populist movements that have stoked fear that Italy could possibly leave the European Union and revert back to a single currency system.

Italy's new government has signaled it doesn't intend to leave Europe's single currency, easing the most acute concerns.

The German bunds slumped during European session Thursday after Eurozone's consumer price inflation (CPI) for the month of May beat market expectations, besides, the cooling down of Italy's political situation. This could also restrict Chinese investment in the U.S. and what products USA companies can sell to China. For the US, this presents some opportunity. If there's going to be an increase in deficit spending in Italy, that could potentially rub up against restrictions on European Union members.

The Italian election risk had also sent investors scurrying for safer German and US government bonds, as well as currencies such as the yen and Swiss franc, at the expense of the euro.

Shares in Italian banks Banco BPM, BPER, UBI and Intesa Sanpaolo were among the biggest risers on the STOXX, up between 3.3 percent to 8.5 percent after sustaining heavy losses in the previous month.

Bond markets shuddered Tuesday, sending the yield on Italy's two-year bonds sharply higher - a sign investors think the bonds have suddenly become riskier investments. The index dropped a total of 0.2%, to 94.672 as other major currencies tallied bullish performance.

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By the closing bell, Kinder Morgan stock was back down to $16.10. "This is an investment in Canada's future", he said. Filed last month, it asks if B.C. has the authority to limit the amount of bitumen transported through the province.

After stripping out the volatile items of energy, food, alcohol and tobacco, inflation only rose to 1.1 percent from 0.7 percent.

The Italian President Sergio Mattarella may well have been perfectly within his rights to veto the appointment of Paolo Savona as finance minister of a new populist Italian government but the way he went about it has been a gift to euro sceptics across Europe, let alone in Italy, fuelling a perception that the established order is subverting democracy.

Spain's IBEX 35 jumped 1.8 percent after Spanish Prime Minister Mariano Rajoy was ousted as leader of the country Friday. The Russell 2000 index fell far less than the Dow, giving up 0.2 percent to 1,623.65.

The latest figures still pale in comparison with expected profit growth of 23 percent for this year for S&P 500 companies. Since Italy's vote in March, the euro currency has lost almost 1% of its value every week.

The yield on the benchmark 10-year Treasury note was lower at around 2.826 percent, while the yield on the 30-year Treasury bond ticked down to 2.991 percent. Brent crude, used to price worldwide oils, rose 0.1 percent to $75.39 a barrel in London. US crude rose 0.2 per cent to $67.19 a barrel. It lost 1.7 percent to $67.04 a barrel on Thursday. While that's a four-year high, it's still well below the 7 per cent rate that precipitated Italy's crisis in 2011.

Japan's Nikkei 225 stock index dropped 1.5 percent to 22,013.86.

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