Political turmoil looms in Italy while Brexit clears the final hurdle.
23 January

Political turmoil looms in Italy while Brexit clears the final hurdle.

 

Italian Prime Minister Giuseppe Conte cancelled a planned trip to the World Economic Forum meeting in Davos a day after the head of the co-governing 5 Star Movement resigned, piling pressure on his divided coalition. The prime minister’s office gave no detailed reason for the cancellation of the trip but said Conte would be remaining in Rome to work on “urgent issues”. It had been hoped that the 5-Star leader’s resignation would go smoothly and not affect the fragile coalition but Luigi di Maio – also foreign secretary – added to growing uncertainty by resigning ahead of local elections where the right-wing League is expecting big gains. The 5-star movement has been hit by a series of high profile defections from its parliamentary party, losing more than 30 lawmakers since 2018, amid deep disagreements on policies including its partnership with the centre-left Democratic Party.

 

Britain moved a step closer to its Jan. 31 exit from the European Union when the legislation required to ratify its deal with Brussels passed its final stage in parliament. The bill will officially become law when it receives Royal Assent from Queen Elizabeth. The House of Commons overturned changes from the House of Lords, including a clause to ensure protections for child refugees after Brexit. Johnson had refused to accept any changes to the bill, which will enact Britain’s departure from the EU, facing down opposition lawmakers who say he has hardened its terms. The Lords could have sought to reinstate the changes, but opted not to, allowing the legislation to clear its final hurdle in Britain. A consent vote in the EU Parliament will take place on Jan 29. As it prepares to open to new markets, Britain is now being more vocal in wanting a trade deal with the United States but will impose a digital service tax on the revenue of companies such as Google, Facebook and Amazon, business minister Andrea Leadsom said only days after Prime Minister Johnson addressed African leaders asking for stronger trade ties.

 

European Central Bank President Christine Lagarde is set to launch a broad review of its policy today, one that is likely to see her redefine the ECB’s main goal and how to achieve it. The euro zone’s central bank has fallen short of its inflation target of just under 2% for years despite increasingly aggressive stimulus measures under Lagarde’s predecessor, Mario Draghi. ECB rate-setters are not expected to make any policy change this week but simply stand by their pledge to keep buying bonds and, if needed, cut interest rates until price growth in the euro zone heads back to their goal. While these matters are addressed, the ECB is expected to leave its monetary policy on hold. That would leave it buying 20 billion euros worth of bonds every month and charging banks 0.5% on their idle cash for most of the year. Euro zone data has improved recently, leading economists to believe the export-focused economy has weathered the storms of the global trade war. Furthermore, a trade deal between the United States and China, and the prospect of an orderly Brexit are lessening the two main risks the ECB had said were clouding the horizon.

 

Oil prices fell to their lowest in seven weeks sliding more than 1% on concern that the spread of a respiratory virus from China may lower fuel demand if it stunts economic growth in an echo of the SARS epidemic nearly 20 years ago. Brent was down $1.37 cents, to $61.84 a barrel and earlier dropped to the lowest since Dec. 4 after falling 2.1% the previous session. U.S. West Texas Intermediate fell 84 cents, to $55.90 a barrel after earlier falling to the lowest since Dec. 3. The contract declined 2.7% yesterday. Elsewhere, amid all the concern about hits to demand, supply remains plentiful. U.S. crude stockpiles rose last week by 1.6 million barrels, against expectations of a drop, the American Petroleum Institute said late on Tuesday. Brazil also produced more than a billion barrels of oil in 2019, a first for the South American nation. Meanwhile China released data showing its gasoline exports are surging, rising nearly a third last year as more new refineries are opened.

 

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