“The stable outlook – we read again in the note – is based on the forecast of an increase in debt and more resilient economic growth following the stimuli offered by European funds”.
Maneuver, who gains and who loses
The impact on the maneuver
An upward adjustment was in the air, even if the bets on the eve were uncertain as to whether it would arrive as early as Friday evening, and it marks an excellent kick-off for the maneuver expected between Sunday evening and Monday in the Chamber for the start of the examination. In the Accounts Plan requested by the reform of the EU fiscal rules, Italy promised to crush the deficit to 1.8% of GDP in five years, raise the structural primary balance to 2.2% and maintain the pace of increase in primary spending at 1.5% avoiding new tax or social security adventures. And observers show that they appreciate, perhaps more than some sectors of the same majority, the “responsible and prudent” policy claimed by the Minister of Economy Giorgetti on every occasion, public and otherwise, in the name of a “credibility” that offers dividends precisely in terms of spread.
What obviously helps is a scenario in which monetary policy has changed direction, thanks to a slowdown in inflation so clear as to fuel the hypothesis of a further rate cut before the end of the year, with the consequence that the Conti was able to budget for a decrease in interest expenditure dynamics of 13 billion in three years compared to the forecasts of the Def in April (Sole 24 Ore of 1 October). But as the French case shows, and the Paris spread which travels 30 points above June levels, macro premises can be useful but alone they are not enough. And this is what is crushing the spread between BTp and Bund, in recent days, to three-year lows: «The markets note that the Maneuver is attentive to public finances and is not creating conflicts with Europe», observes Giuseppe Sersale, partner of Anthilia. And this reassures investors quite a bit. Who now also take note of the improvement in the rating outlook.
Gold on records
But the day also saw other stories on the markets. The first is the new, yet another, record for gold, which has exceeded the threshold of 2,700 dollars an ounce for the first time. Why? What drives him so high? If you read the comments, the emphasis is on geopolitical tensions in the Middle East. «The markets are focused on geopolitical tensions, after Israel killed Hamas leader Yahya Sinwar», writes Bloomberg in the commentary on the yellow metal. Reuters speaks of “demand for safe haven assets in view of the US presidential elections and due to tensions in the Middle East”. Rhona O’Connell, analyst at StoneX, reiterates the same concept: «Markets continue to look at geopolitics and the Middle East».
But these reasons are not very convincing. If this were the case, if the markets were really in tension for the Middle East, then it would not make sense for the stock markets as well as gold to be at historic highs. Stock markets rise when there is optimism, not when tensions are only high. And yesterday too, Frankfurt and Wall Street reached historic highs. So why does gold continue to run? There can be many explanations, and one looks to China: since the Central Bank stopped accumulating gold in May (to balance reserves in favor of the yellow metal), accumulation in industrial silos in China has grown exponentially. This, combined with various other reasons, led gold to surpass the $2,700 per ounce mark.
The Rollercoaster of Economic Policy: Buckle Up, Everyone!
Ah, the stable outlook – it’s like a temperature check at a family reunion. You know things are bound to get awkward, but at least nobody’s throwing things yet. The forecast of increasing debt and resilient growth thanks to European funds? Right! We’re banking on a little European fairy dust to save our fiscal behinds! But who are we kidding? It’s more of a financial “Happily Ever After Until The Bills Come Due” scenario.
The Impact on the Maneuver
Now, let’s talk about the maneuver. It’s like trying to parallel park a bus – a bit tricky with everyone watching, and everyone has an opinion. Sure, the upward adjustment was anticipated, but it sounds like the economic community was about as uncertain as a cat in a room full of rocking chairs. The euros were clutching their pearls, asking, “Will it happen Friday, or… is that too much optimism?”
In essence, Italy is playing a game of fiscal poker – promising to crush that deficit to 1.8% of GDP while maintaining a structural primary balance like it’s a tightrope walk. And here’s the kicker: while the Minister of Economy, Giorgetti, shouts “responsible and prudent” from the rooftops, you can almost hear the collective sigh of relief from investors. They’ve been holding their breath longer than a kid waiting for the school bus!
But let’s not forget the biggest player in this game: monetary policy. With inflation slowing down and whispers of potential rate cuts, it feels like financial analysts are getting cozy, possibly even ready to pop the champagne. A 13 billion euro reduction in interest expenditure? Well, that sounds positively luxurious! But don’t get too comfy – as the French case shows, red flags can appear faster than a bad Tinder date.
Gold on Records
Meanwhile, over in a different corner of the economic circus, we have gold reaching new heights like a contestant on a reality TV show. $2,700 an ounce? Good grief! It seems like every time you turn around, your investment in shiny rocks is a little shinier. The reason? Geopolitical tensions, which sounds very serious, doesn’t it? But here’s the thing: if the Middle East is as tense as they say, then why are the stock markets also climbing, high-fiving each other like they’re at a post-pandemic rave?
Bloomberg blames it on geopolitical tensions and all I can think is, “Great, we’re gearing up for a financial soap opera!” It seems that rondeaux of doom doesn’t play well with optimism. Then there’s the little matter of China’s central bank – they’ve been hoarding gold like it’s the last bag of chips at a party, creating an interesting twist in this already confounding tale.
The truth is, markets are like children – they act based on their environment but require a comforting balance. While geopolitical tensions tug at their sleeves, major stock exchanges are throwing up historic highs like they’ve just had a sugar rush from a pack of gummy bears.
So here we are, folks, riding the economic rollercoaster where the money flows, gold glimmers, and everyone is waiting for the next thrilling drop. Strap in, and don’t lose your hats!