Week in Review Week Ending 1 June 2018

Week in review Week ending 1 June 2018

Key highlights The Italian job

It felt like one step forward, two steps back for Italy this week, as its 1. The Italian job two populist political parties – the League and Five Star Movement – persisted in their attempts to form a “neutral” coalition government. 2. U.S. tests EU metal After more than three months in administrative limbo, things were 3. A tasty treat for sandwich maker's staff looking up until President Mattarella vetoed their choice of finance minister – Eurosceptic Paolo Savona. His intervention effectively 4. And finally ... blocked the two parties joining forces and sparked outrage from supporters in both camps, with calls for the President to be impeached. Where have we heard that before?

So another day, another deadlock, which markets did not like. Italian equities sold off and government bond yields surged to 2012 Greek- crisis levels, triggering contagion across other European markets mid- week. The Italian banks, already struggling to get back on their feet, were hit hard and some face the threat of ratings downgrades.

By the end of the week, however, the political pantomime had taken on an entirely different complexion and some calm was restored. After the low-key ‘exit stage left’ of Mr Savona, the two parties revived their coalition plans, proposing Giuseppe Conte as Prime Minister for the second time in eight days. Mr Conte, having again accepted the President’s mandate to lead the country, presented a list of new, more palatable candidates for the key finance job, from which economics professor Giovanni Tria emerged victorious.

So it looks like Italy’s current political impasse may have passed, with the new government sworn in on Friday. However, investors will likely remain cautious on what’s to come from Italy’s first populist Eurosceptic coalition. We watch and wait. U.S. tests EU metal Similar competition concerns had to also be allayed for European authorities to give their blessing. With the deal Not content with just the one trade war on his hands, almost sealed, we wonder if there has been a more President Trump has provoked anger from so-called attractive US/German coupling since Andre Agassi and “friendly” countries with his latest protectionist measures. Steffi Graf? Having previously granted a temporary ‘stay of execution’ to major trading partners the EU, Mexico and Canada on Given the week’s not inconsiderable drama, markets metal import tariffs, trade talks failed to secure a were unsurprisingly weak. To the close on Thursday, the permanent exemption. So, with effect from 1 June, imports FTSE World Europe (ex-UK) had lost 2.2%, while the FTSE to the US of steel and aluminium now face duties of 25% 100 and S&P 500 indices were 0.6% and 0.5% lower and 10%, respectively. respectively.

In retort, Uncle Sam’s vexed trading partners have subsequently threatened retaliation by hitting the US And finally... where it hurts – in its blue jeans, bourbon whiskey and It would appear that President Trump has more than one Harley-Davidson motorbikes. ‘special’ Kim in his life. Demurely suited but still A tasty treat for sandwich maker's stilettoed, the seemingly ubiquitous Kim Kardashian West visited the Oval Office on Wednesday to discuss prison staff reform and sentencing. Indeed. Staff in Pret A Manger were just that little bit perkier this week. The two prolific tweeters issued positive posts afterwards. Could KKW, a former supporter of Hillary Clinton, be The soup and sandwich maker, currently owned by following husband Kanye’s lead and warming to Mr private equity firm Bridgepoint, has been bought by JAB Trump? Holdings in a deal reported to be worth £1.5bn. When the deal is concluded, every staff member has been promised Not forgetting the President’s other Kim, fresh a £1,000 bonus. negotiations for a North Korea/US summit in June were said by Secretary of State Mike Pompeo to be “moving in Elsewhere, after a near two-year courtship fraught with the right direction”. He enjoyed a lavish dinner date with knockbacks and wrangles, German pharma and Kim-Jong-un’s Vice Chairman, Gen Kim Yong-chol, in New chemicals giant Bayer has finally crossed the last hurdle York this week. in its proposed takeover of US agriculture firm Monsanto. Like any relationship, there has been give and take. Bayer Perhaps familiar with Albert Einstein’s view that “an had to agree to give up a $9bn chunk of its assets before empty stomach is not a good political advisor,” the two US antitrust authorities could approve the union – the men are said to have enjoyed steak, sweetcorn and “largest merger divestiture ever required by the United cheese, washed down with Islay Malt Whisky. States”. With such convivial interactions, we could see the historic rendezvous back on the table. Who knows what might be on that menu…

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The information contained within this document is based on Aberdeen Standard Investments understanding as at 1 June 2018. Nothing in this document is intended to or should be construed as investment advice or recommendations of any nature. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. Please rememberthatthe value of your investment can go down as well as up and may be worth less than you paid in.

Source: Aberdeen Standard Investments, 1 June 2018. Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.

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