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Resiliency Demonstrated

Marc Chandler profile picture
Marc Chandler


  • Italian markets snap back.
  • Checks and balances may work to check US tariffs.
  • USD has a softer profile; week's key events - ECB, BOJ meetings and US jobs data - ahead.

The resiliency of the status quo is again on display. After much chin wagging and finger pointing after the Italian elections and the modest decline in Italian assets, they have bounced back today. Italian bonds and stocks are participating in today's advance. Italian equities were off 0.5% yesterday and are up 1.1% near midday in Milan. Italy's 10-year yield rose three basis points yesterday is off five today.

It is true that in these early hours after the election, in which the center parties lost handily, the new government is hard to envision. There does seem to be a lot of posturing. However, recall that in September German SPD leader Schulz ruled out another grand coalition, but this past weekend, the SPD approved it, though with Schulz. Renzi offers to resign as leader of the PD, but only apparently after a new government is formed and the PD is not part of it.

Last week's indication that the US Administration was preparing to put a 25% tariff on steel imports and a 10% tariff on aluminum sent ripples through the capital markets. It is the beginning of a tit-for-tat trade war were told. Shades of Smoot-Hawley. The system of checks and balances continues to unfold.

Republican leaders have pressed the President to reconsider, as they successfully did on his stance on guns and immigrants. Gary Cohn, head of the National Economic Council has reportedly pulled together an industry summit to explain to the President why the tariffs will end up undermining the US economy and offset the beneficial impact of the tax cuts.

If persuasion is not sufficient, there is more Congress can do. Republican Senator Lee has proposed a bill, the Global Trade Accountability Act, which would claw back some of the power the legislative branch has surrendered to the executive

This article was written by

Marc Chandler profile picture
Marc Chandler has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009 Chandler was named a Business Visionary by Forbes. Marc's commentary can be found at his blog (www.marctomarket.com) and twitter www.twitter.com/marcmakingsense

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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