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‘A Total Mess’: Investors in Italy Stocks React to Conte’s Exit

Jan-Patrick Barnert, Justina Lee and Michael Msika
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‘A Total Mess’: Investors in Italy Stocks React to Conte’s Exit

(Bloomberg) -- Italian Prime Minister Giuseppe Conte’s decision to hand in his resignation isn’t helping stressed-out holders of the nation’s equities.

The FTSE MIB Index fell as much as 1.3% before paring its declines to 0.6%, led by a retreat in Italy’s biggest companies, such as UniCredit SpA and Ferrari NV. In contrast, bond holders rejoiced, shining a light on the divide between equity and fixed-income investors in Italian markets.

The impact of Conte’s announcement transcends the nation’s assets and boosts the political risk for the entire region. European equities are notoriously unloved by global investors due to a lack of political predictability, among other factors.

Here’s what investors and strategists are saying:

Uwe Maderer, Deka

“The Italian situation continues to be a total mess. They have not understood the precarious economic situation in which the country is. I see nothing positive in Conte’s resignation and in new elections in the autumn. The only positive sign for Italy is the potential upcoming renewed ECB easing.”

Chris Beauchamp, IG

“His resignation was expected, but perhaps not so quickly. But he has pulled the rug out from underneath Salvini -- the coalition is probably at an end. It marks a significant escalation in the government crisis and puts the Italian budget in jeopardy, although if he can cobble together one without the League, it might help to provide a better platform for negotiations with Brussels.”

Manish Singh, Crossbridge Capital

“It adds to uncertainty in Italy and by extension to the euro-zone. Salvini is running high in the polls, if he wins as is predicted, what stops him from pursuing a wholly independent policy that runs against what Brussels wants/likes -- flat tax, more spending, higher deficit? It will open a can of worms in the euro-zone. Were Italy to succeed in bringing growth back on the back of that, the EU will have existential questions to answer, given they are so opposed to his policies.”

Stephane Barbier de la Serre, Makor Capital Markets

“Beyond traditional theatrical antics, what we have seen today on the Italian front has been largely anticipated by markets, which does explain the essentially muted reaction to Conte’s resignation. Put it this way: a new election is not a done deal yet and a new government and therefore rejuvenated impetus may precisely be what the country needs at this juncture.”

--With assistance from Ksenia Galouchko.

To contact the reporters on this story: Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.net;Justina Lee in London at jlee1489@bloomberg.net;Michael Msika in London at mmsika4@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen

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