Weekly Outlook 22/10/18 to 26/10/18

Rome vs Brussels The EU Commission has asked for Italian officials to justify their proposed deviation from the public deficit Maastricht rules until today. Discussions regarding the budget draft are therefore likely to go on over this week. The outcome of this debate will be key, as Italy’s 10-year yield rose to 3.71% last Friday, resulting on a 5 year record spread over similar maturity German yields. Other peripheral countries, such as Portugal, Spain and Greece were also hit by the recent turmoil.

German Election Mania After last week’s historic loss for the German CSU and SPD (Christian and Social democrats) in the Bavarian elections, the next election in the state of Hesse is just around the corner. It remains to be seen whether the green wave continues next Sunday. Polls suggest a head to head race between the Greens (20-22%) and SPD (20-21%) for the second place, behind the CDU (26%). Will the SPD suffer another historic loss and would it lead them to leave the grand coalition in Berlin?

Additional Information

  • The ECB is announcing their October Interest Rate decision next Thursday. Whether interest rates are going to be increased is yet to be seen.

  • Next Friday, the US Bureau of Economic Analysis is set to release GDP annualized growth figures with respect to the month of July.

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