“The political elections will be held in Italy on March 4th. The result is, to date, very uncertain as none of the main political parties could obtain an absolute majority in Parliament. We believe that the three most likely scenarios are, in order: a centrist grand coalition, a caretaker government supported by a broad coalition and a return to elections”. This is what we read in a Ubs report signed by Matteo Ramenghi, Chief Investment Officer Ubs WM Italy.
“A grand coalition would be welcomed by the markets, as it could bring political stability – continues the analysis – while a return to elections would prolong the uncertainty and therefore could weigh on Italian assets”.
As far as the equity market is concerned, “at the Eurozone level we have a neutral position on Italy – continues the report – while as far as Europe is concerned, we keep the Eurozone overweight compared to the United Kingdom”.
On the government bond front, however, the UBS analyst believes that “current risk premiums already reflect political uncertainty. The positive economic phase and the ECB's asset purchases, at least until September, should mitigate the volatility. Risk premia should not rise significantly between now and the elections."
For these reasons, the institute is monitoring "the announcement of the electoral program by the main parties, the presentation of coalitions and candidates at the beginning of February and the electoral polls".
