MNI US Open: Equities Shrug Off Political Risk

EXECUTIVE SUMMARY:

• ITALY COALITION RISKS COLLAPSE
• U.S. HOUSE OF REPRESENTATIVES SET FOR IMPEACHMENT VOTE AS REPUBLICANS BREAK FROM TRUMP
• E.C.B. FORECASTS STILL STAND IF LOCKDOWNS LIFT BY END-MARCH: LAGARDE
• E.C.B. NEEDS ABILITY TO EXCEED 2% INFLATION TEMPORARILY: VILLEROY
• JAPAN EXPANDS VIRUS EMERGENCY; TO SUSPEND ENTRY OF ALL FOREIGNERS

Fig. 1: Italian Political Risk Creeps Higher

BBG,MNI

NEWS:

ITALY (BBG): The government of Italian Prime Minister Giuseppe Conte is at risk of collapsing as a junior ally prepared to abandon the coalition as early as Wednesday, just as the administration seeks to push through measures to battle the pandemic and boost the economy.Ex-Premier Matteo Renzi, leader of the Italy Alive party, will hold a news conference at 5:30 p.m. in Rome after a decision on whether to pull his two ministers out of the coalition in a long-simmering clash with Conte. Renzi's party has only 3% support in opinion polls but a pullout would still rob Conte of his parliamentary majority.Renzi's ministers are expected to resign from the government in a letter they will send at 5 p.m. Wednesday afternoon, daily la Repubblica reported.

U.S. (BBG): The U.S. House prepared to vote on a history-making second impeachment of Donald Trump as lawmakers seethed over his role inciting last week's mob attack on the Capitol and the president's once-firm control over the Republican party began to break down. Trump's impeachment appeared inevitable in a vote Democrats anticipated would come Wednesday with the resolution's sponsors claiming broad support from Democrats and public backing from several Republicans, including Liz Cheney, the No. 3 House GOP leader and daughter of former Vice President Dick Cheney. The House is set to begin debate shortly after 9 a.m. with the vote on the impeachment resolution expected by mid- to late afternoon, according to House Rules Chairman Jim McGovern. Under rules in place because of the coronavirus pandemic, members will vote in staggered groups on the House floor, and some by proxy, concluding before 5 p.m.

ECB (RTRS): The European Central Bank's forecast of an economic rebound this year still stands despite fresh restrictions to activity in several euro zone countries, provided those measures are lifted by end-March, ECB President Christine Lagarde said on Wednesday."I think our last projections in December are still very clearly plausible," Lagarde said in an interview at the Reuters Next conference. "Our forecast is predicated on lockdown measures until the end of the first quarter."She added it would be "a concern" if curbs to economic activity continued in the second quarter.

ECB (BBG): The European Central Bank's 2% inflation target must be symmetrical and judged over the medium term, Bank of France governor Francois Villeroy de Galhau tells lawmakers at the National Assembly's finance committee."Today we describe it as close to but below 2%. If that's a ceiling, we will never get there on average as we will hit the ceiling. So we need to have the capacity to temporarily go beyond 2% without it automatically triggering a tightening of monetary policy."

JAPAN (BBG): Japan's government has declared a state of emergency for seven more prefectures later Wednesday in a bid to stem a sharp rise in coronavirus cases and relieve pressure on hospitals. The additional restrictions will apply to the western Japanese prefectures of Osaka, Hyogo and Kyoto, the central prefectures of Gifu and Aichi, which includes Nagoya, as well as the southern prefecture of Fukuoka and the eastern prefecture of Tochigi and will last until Feb. 7, as it does for Tokyo and its surrounding prefectures of Kanagawa, Saitama and Chiba. The move means the major urban centers of Tokyo, Osaka and Nagoya will all now be under states of emergency.

JAPAN (NHK): The Japanese government plans to suspend the entry of all foreigners as the coronavirus continues to spread around the world. Japan halted all new arrivals of non-nationals last month after new strains of the coronavirus that are believed to be highly transmissible were confirmed in the UK and elsewhere. But it continued to allow entry by businesspeople from 10 Asian countries and Taiwan. The government plans to suspend the entry of travelers, regardless of whether a coronavirus variant has been detected in their country, as part of its tighter entry restrictions following the declaration of a state of emergency. No foreigners will be allowed to enter Japan, except for special reasons, such as a relative's funeral or childbirth.

EU-UK (BBG): Less than two weeks after Brexit fully kicked in, European regulators say some bankers are already resorting to "questionable practices" to improperly preserve their previous business arrangements. The Paris-based European Securities and Markets Authority said some companies outside the bloc are skirting rules on solicitation, which allow these firms to handle business for an EU client only when the customer has sought it on their own. ESMA said on Wednesday that "some firms appear to be trying to circumvent MiFID II requirements by including general clauses in their terms of business or through the use of online pop-up 'I agree' boxes whereby clients state that any transaction is executed on the exclusive initiative of the client."

ITALY DATA: Italian Industrial Production Down in Nov* Nov SA industrial output declined by 1.4% m/m (Oct revised higher to +1.4%m/m), while the annual output fell by -4.2% y/y WDA* Nov's reading is below market expectations looking for a flat reading* Nov SA m/m intermediate goods rose, while consumer, capital and energy goodsdecreased-ISTAT* Nov WDA y/y consumer, capital, intermediate goods and energy alldeclined--ISTAT* There were 21 working days in Nov 2020 vs. 20 in Nov 2019.

RIKSBANK: The Riksbank is moving to a self-financed foreign exchange reserve, replacing foreign currency loans issued via the Swedish National Debt Office and instead purchasing around SEK 5 billion per month in the FX market. The central bank intends to repay the currency loans taken by the Swedish National Debt Office as they mature.

DATA:

LOOK AHEAD: