This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Optimism Reigns as Berlusconi Faces Test

NEW YORK ( BBH FX Strategy) -- Markets remained cautiously optimistic ahead of today's Italian parliamentary vote on public finances, which threatens to topple Prime Minister Silvio Berlusconi.

European stocks are rising, with the Euro Stoxx 600 rebounding (up 1.4%) from a two-day decline, after Asian shares traded defensively overnight. European bank shares are up nearly 2.0%.

Italian Premier Silvio Berlusconi

Eurozone finance ministers last night discussed details for the leveraging of the European Financial Stability Facility to 1 billion euros, now hoped to be in place in December. Both the insurance model and the SPV to attract outside investors remain on the table.

Despite the recent pressure on the EZ sovereign debt market, Greece was able to sell 26-week bills at 4.89 and the Italian 10-year yield is lower on the day. The EUR/CHF saw choppy action amid comments from the SNB's Jordan, indicating that the SNB's policy action is dependent on deflation.

Follow TheStreet on Twitter and become a fan on Facebook.

Italian politics remains in the spotlight. The Italian bond market's off-the-run 10-year yields are currently at 6.591%. The Italian government will submit a routine budget for Parliament to vote today, with Berlusconi attaching a confidence vote to a failed budgetary outcome. From there, if the government fails to reach a majority of 316 votes for a confidence vote, Berlusconi will be forced to resign his post.

Ahead of the vote, speculation about the prime minister's imminent departure is rife and markets have welcomed the prospect. In Italy's fragmented political landscape, his departure would not necessarily mean that austerity measures will pass quicker.

If the Berlusconi government falls, the first choice would likely be to see if a new coalition government can be formed with the existing parliament. This is likely to be supportive of risk appetite in the short term, but it would end quickly if a coalition could not be formed and the fall in the government were to lead to elections. This would ultimately delay the passage of the austerity measures and sap business and investor confidence even further.

Nevertheless, from here the best outcome for market sentiment in is likely to be a resignation of Berlusconi followed by the formation of a new government from the existing parliament. Looking ahead we still expect the euro to come under pressure with a short-term target near 1.3650, but we acknowledge that we could see the euro get a short term boost from today's vote with resistance expected near 1.385.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.46 -1.50%
FB $78.97 -1.79%
GOOG $558.40 0.53%
TSLA $203.34 -1.86%
YHOO $44.28 -0.38%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs