Cold shower on the world stock exchanges after the projections in the Senate. Which disavow the first exit polls, at least as regards a possible improvement in favor of governability. The overtaking of the centre-right coalition in the Senate has wrong-footed the markets that were hoping for a result that would make clear the possibility of a stable majority. Even the FT Times, which promptly headlined the first exit polls "Centre-left towards triumph", had to take a step back and now headlines "Exit polls leave the result uncertain".
The shock made him stop Wall Street (the Dow Jones went negative at the close of Europe) and the European Squares, which in any case closed positive, and frozen Piazza Affari which briefly went negative to then drop slightly above parity compared to the +4% previous to the results , with a flurry of suspensions on major titles. The spread also accelerated and returned above 270 basis points again. The Ftse Mib then recovered slightly and closed at +0,73%.
“It is not an exaggerated reaction from the markets – explains Carlo Gentili of Nextam Partners to Firstonline – compared to the result announced by the exit poll, the situation has radically changed and the markets fear the uncertainty or the affirmation of those who propose to leave Europe. Some things said in the electoral campaign are totally preposterous and unfeasible. A situation that for the next few months indicates that we can expect a drop in the markets, there's not even talk of a roller coaster, if the situation is like that I don't see any rises". The importance of governance is also underlined by the Wall Street journal for which stable government is necessary to "lead a sick economy and prevent the country from becoming a problem for Europe again".
The uncertainty of the result is high, as well as market volatility. In the operating rooms it is reported that "the worst possible scenario is materializing: that of ungovernability" At the time of the diffusion of the first instant pools, the spread between BTPs and Bunds reached the minimum of the day, below 260 basis points. Then with the arrival of the first projections, which overturned the outcome of the instant polls, the operators point out, there was a "strong movement out of the ten-year BTP", which paved the way for "a widespread wave of sales on the Italian curve”. The spread thus exceeded 280 basis points before falling back to 277 basis points.
Picture reversed also on the currency front. After a general propensity for risk which rewarded the Eurodollar, which returned to 1,33 and European equities, with the Italian elections and the prospect of ungovernability, "the Eurodollar immediately reversed, breaking down the 1,32 from which could sink towards the crucial 1,3150 level,” explained Davide Marone, analyst at FXCM Italia.
But there is a silver lining for the markets, Grillo exploit permitting. “The risk was not only the ungovernability – says Mario Spreafico of Schroders – but also the rift with so many parties that are unable to get together. At the moment I don't see it as dramatic, it seems that despite everything a bipolar architecture has been confirmed. A lot will depend on the spread whether there will be new elections or not. Tensions could subside if a grand coalition government were formed".
Curious the trend of Mediaset che was pushed up to +10% driven by possible post-defeat scenarios of mergers, sales, and then deflating with the market.
