Italy’s 10-year BTP yield was around 3.5%, the lowest in about a month, tracking the movement of its European counterparts and reflecting ongoing economic pessimism in Europe, along with rising concerns about the potential impact of a second Donald Trump administration.
Italy 10-year BTP yield hits lowest in one month
Trump reaffirmed his threats to raise tariffs, including a 10% increase on China and a 25% hike on Mexico and Canada. He also warned during his campaign of significant tariffs on European goods, particularly cars, stating the EU would "pay a big price." These threats further complicate challenges for Europe’s struggling manufacturing sector.
PMI contraction
Preliminary PMI data showed a renewed contraction in Eurozone private sector activity, adding to the risks posed by the ongoing war in Ukraine and political instability in Germany and France. This grim outlook has led investors to raise expectations for aggressive monetary easing by the ECB. While a 25 bps rate cut next month is fully priced in, the likelihood of a larger 50 bps cut has risen to 58%.
