Lionel Melin

Lionel Melin

Senior Cross-Asset strategist

March 4th: can Italy or Germany surprise?

26 Feb 2018

Active Strategies

Italy’s election polls show Rome’s fragmented politics; however, a centre-right coalition emerged

  • Rosatellum election law should prevent disruptive M5S from rising to power
  •  A centre-right majority could surprise expectations of a hung Parliament

 Polls foresee that SPD members will green-light another German Grand Coalition

  • Key finance minister position conceded by the CDU/CSU to center-left partner
  • Recent rise of the far-right in polls could decide SPD voters

EMU risk assets resilient to political stress, although the economic recovery looks underpriced

  • EUR appreciation is capturing its lion’s share
  • U.S. flows into EMU equity have restarted in early 2018

With Catalonia’s crisis stalled, March 4th is the next milestone for EMU politics. Markets seem not to prepare for a make-or-break scenario… for once!

However, while an Italian majority government could support our positive stance on EMU risk assets, an unexpected German coalition rebuke may open far-right scares and fuel an EMU risk-off episode.



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