The World's oldest bank on the brink, but will an Italian bail out save it?

Yesterday’s markets

22nd December 2016

  • USD - Crude Oil Inventories: 2.3M
  • NZD - GDP q/q: 1.1%
  • GBP - Public Sector Net Borrowing: 12.2B
  • USD - Existing Home Sales: 5.61M
  • NZD - Current Account: -4.89B

Founded back in 1472, Monte dei Paschi the third largest bank in Italy and said to be the world’s largest bank, was once again yesterday under the spotlight.  After failing the European Stress test in July due to the billions of Euros of risky loans on its books, held by clients that are unable to repay them, it was stated yesterday that it is due to run out of funds by April 2017. As a result, shares in the bank fell sharply, yet again, to their lowest level since 1999 and as such the bank intervened and suspended trading.

In fears of the bank failing and possibly collapsing the rest of Italy’s banking sector, the new Italian Prime Minister Paolo Gentiloni has vowed not to let the bank fail.  As Monte dei Paschi so far have failed to raise capital of around 5bn Euros before month end, Parliament have stated that the government could borrow the required funds to support the bank. This, after the recent referendum, is no doubt going to add to the already pressured Italian government.

Today’s markets

21st December 2016

  • CAD - CPI m/m
  • CAD - Core Retail Sales m/m
  • USD - Core Durable Goods Order m/m
  • USD - Final GDP q/q
  • USD - Unemployment claims
  • CAD - Core CPI m/m

Today focus of markets will be on the US releasing their last reading of Q3 GDP.  After rates were again increased by the Fed earlier in the month, this final reading of the US economic growth for Q3 is expected to show a slight improvement ticking up to 3.3% from the previous 3.2%.  Also hitting the wires at the same time is durable goods orders for the month, and if a good figure is also seen here this could spur investors into the Greenback.

Have a good day.