— This is the script of CNBC's news report for China's CCTV on May 30, 2018, Wednesday.
The political crisis in Italy shocked international financial market in the overnight, causing Europe and US market declined; Euro was sold off and safe heaven asset, such as gold, increased. Let's have a look of the European market' performance. Obviously, Italy's political turmoil and uncertainties in the future caused European market to fall. Italy's FTSE MIB index plummeted 2.65%; UK's FTSE 100 index fell 1.26%, while Germany's DAX fell 1.53%, at the same time, both the French CAC40 index and the Spanish IBEX35 index suffered heavy losses in different degrees.
Among them, because Italian bank holds huge amount of Italian government bonds, the bank stocks of Italy and other Euro countries were sold off because of Italy's political turmoil and uncertainties in the economy future. Traders are trying to judge if this round political crisis in Italy will become a crisis in European financial market again, including the probability that Italy may withdraw the Eurozone, and if these predictions come true, then the market will also judge which banks can withstand a new round of Eurozone crisis.
Italian bank stocks suffer the most: the stock price of UniCredit that is the biggest bank in Italy was off 5.61%. However, European financial stocks are generally sold off, for example, Santander Bank of Spain fell 5.43% while Commerzbank fell 4.06%.
And Italy crisis, which has lasted for 1 month, firstly affected the financial market that is on the other side of the Atlantic during the overnight, weighting down US stocks drop. Dow & Jones industry index decreased 1.58%, with a nearly 400 points drop; S&P 500 declined nearly 1.16% and NASDAQ composite index shed 0.5%.
Among them, the major banks on Wall Street, including the stock prices of JPMorgan, Citigroup and Bank of America dropped around 4%.
Additionally, the one-day loss of euro-dollar exchange rates once reached more than 0.8% amid the shock of Italy crisis, hitting a new low since July last year. And for the Euro, some information shows that Italy may hold a new round election as early as July after it failed to form cabinet, but the outside worries about the new election may become a vote of withdraw Eurozone. When the government is in political dilemma, the coming high government debt and populism will continue to bring shocks to the euro.
Now Italian bonds were sold off. We know that bond sell-off raises bond yields, and Italy's two-year bond yields hit the biggest one-day gain since 1992 overnight. The rating agency Moody's also hinted that if the next Italy government cannot deal with the debt, then Moody may downgrade Italy, we will pay close attention to the development of this event.