Risk Off? Yes - But Both Italy And EM Issue To Be Contained

Published 05/25/2018, 02:55 AM

Risk sentiment has soured markedly as Italian debt worries and USD strength have weighed.

The new Italian government implies market uncertainty for now but we do not see the debt issue leading to a new euro crisis.

US yields show first signs of settling down a bit - and indeed we think the uptick could take a breather in the near future.

USD strength could stick around near term as the US holds a favourable cyclical position still but should abate further out.

Emerging markets to remain wobbly near term but we do not see a contagious situation - however, the dust has not settled in Turkey yet.

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