Referendum Renzi 2016

Derek Halpenny any European head of U. global markets research at the bank of Tokyo Mitsubishi great to have you on the program I like to kick start the chat with Mister fantastic love the chart here which shows the Italian German 10 year spread and how it sort of evolved this goes back to 12/20/1400 if if you spike soon bear and then look at that starting September all the way up and then it's it's narrowed slightly since of course if you were to take a longer range at that would be not as big as a spy because it currently looks.

Referendum Renzi 2016

Italian elections I mean just as we thought we had recovered from the American political volatility what's Europe's top line read on what's going on here. Yeah well you know I I think that the most important point to make on this is it yes you know in terms of Italy specifically that there are important implications in terms which way the vote goes in terms of the banking sector perhaps in particular items the the immediate outlook in terms of politics but I think from a from a market's perspective uncertain and and from the perspective of the forecasts that I'm setting for for the major currencies this is. This is one piece of a potential jigsaw that's playing I was at the moment and it started this year of course with the bags of votes and then move to the United States with the election of trump and if. If we get a novos at the weekends and the freedom party kinds of winning the presidential vote in Austria it'll be another 2 examples of this.


Populism this wave of populism.is spreading throughout the world and is now clearly arrived in Europe I I and what I mean in terms of the broader consequence I think it fit the crucial thing for Europe next year is the French presidential elections. I'm 0 the idea of marina pad winning the last election and it would be catastrophic for Europe matapos clearly show that's not going to happen but if we get those examples of populism spreading right Sosa that feeds into the female will will if we pick up on that in a second how do you trade all of this I mean how do you how do you prepare for this kind of political volatility we were saying this is the spread this is this is the one of one of the many indicators missing a lot of downside pressure as well on the euro I mean how do you trade these kinds of waters but in terms of trading Gaza I probly steer clear of it because you know one of the reasons why we had the narrowing of the spread is this rumor this week about at the ECB would be very active and buying Italians asked if there was a no results on to me that makes perfect sense they're conducting quantitative easing and they want to keep the market stable if there is any blow as I'm sure the city would be and try and contain the move so that's probably not your tribes you know your own lower is perhaps did to try to take on but again post trump we've already had a pretty big move to the downside on euro dollar and so you know to me there's perhaps in the equity space you know I think there's there's opportunities there on I suppose taking a a broader approach.



Buying volatility is is probably the obvious one and I think that would certainly be an element of uncertainty and that would create up volatility CC this European populism spreading and continuing with that kind of momentum going forward because there was that one the other side of the argument which I made it clear that people going to realize you know what populism is not that great and way before the eurozone even starts breaking out that people are going to move back on that kind of sentiment. Well I'm not I'm not convinced about on on I think you know the roots of all of this of course is low economic growth and if you want to points to a country in Europe.

To look for an example of the house there is no better example than Italy and if you take real GDP peak growth levels before the great financial crisis. Real GDP initially is about 7.5 percent below the pre crisis peak in the United States for example its over 11 percent higher than in the UK it's over 8 percent higher so there's this real fundamental problem and it's only I I'm it's to do it dash it's to do with the fact that the have to run these very large budget surpluses druggy this week mentions that that the large budget surpluses being a positive for us in the in terms of that reducing sovereign risk I would argue it's actually one of the reasons why Isley has such significant problems on the growth side is because the have to run those budget surpluses to keep death stable and that's ultimately one of the big problems that is in the house. Derek will continue this conversation that just a few breaking lines here hitting the Bloomberg.