One significant event for Europe is the outcome of the March 4th Italian parliamentary elections.
The election continues the series of populist influenced votes that have swept Europe in recent years (think Brexit and nationalist Marine Le Pen’s second place finish in France). The anti-establishment Five Star Movement party, which is critical of the E.U., the euro and immigration, is currently in the lead.
At this point, the outcome of the vote is far from certain, with no one party likely to receive a majority of votes. A coalition would have to be formed, and Italy may well end up being led by the current, main stream center left Democratic Party.
But there are a lot of possible outcomes, including a coalition of the Five Star party with the right wing populist Northern League party.
Markets are hoping the results do not stop the momentum of the European economy. The Italian stock market is one of the best performing markets so far this year. In December, Eurozone PMI, which measures business activity, was at its highest level in over a decade (see chart).
For now, the best result would be a continuation of the status quo in Italy. While European stocks continue to look attractive and have more room to gain, European government instability is likely a long term theme and will remain, at the least, a distraction.
