ITALY: Continued Pessimistic Comments On EU Defence Spending Facilities
Latest headline on Italian defence spending:
- "ITALY ECONOMY MINISTER: ACTIVATING EU CLAUSE ALLOWING EXTRA DEFICIT FOR HIGHER DEFENCE SPENDING WOULD PREVENT US FROM EXITING EU DEFICIT PROCEDCURE" RTRS
- "ITALY ECONOMY MINISTER CALLS FOR A REVIEW OF 'STUPID AND SENSELESS' EU BUDGET RULES THAT HINDER HIGHER DEFENCE SPENDING" RTRS
Italy's pessimistic stance with respect to the EU defence spending proposals is well known. Our Policy Team wrote on June 12 that the government was exploring ways to delay the implementation of a likely new NATO defence spending target – widely expected to be set at reaching 5% of GDP by 2032 – until 2035, while also seeking an extension of EU fiscal rule exemptions for defence spending, European and Italian sources told MNI.
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STIR: SFI/ER Z5 Spread Through 200bps; Muted Price Action In EUR STIRs Today
The SFI/ER Z5 spread has pierced the 200bps handle, now up 3bps today at 201bps. Resistance in the spread is not seen till 213.5bps, the Jan 14 high. SONIA underperformance has driven movements in the spread today (see our earlier post for more colour), with Euribor price action more muted despite some decent options activity.
- ECB-dated OIS continue to essentially fully price a 25bp cut through June, with 53bps of cuts priced through year-end. Thursday’s May flash PMIs presents the next key regional data release to watch.
- ECB’s Wunsch re-iterated that the Eurozone may need “mildly supportive” rates to help re-anchor inflation at 2%, with the US-tariff induced confidence shock likely to lead to weaker price pressures than previously anticipated.
- Wunsch noted that such a stance would be achieved with two more 25bp cuts to 1.75% - in line with market expectations.
- Eurozone flash May consumer confidence was a little stronger-than-expected at -15.2 (vs -16.0 cons, - 16.6 prior). The survey collection date was May 1 - May 19, so fully incorporated the latest easing of US tariff tensions (e.g. agreements with the UK and China). Country and sub-component level data is not available in the flash release, with more information filtering through in national-based surveys over the coming days.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Jun-25 | 1.937 | -23.4 |
| Jul-25 | 1.868 | -30.3 |
| Sep-25 | 1.751 | -42.0 |
| Oct-25 | 1.703 | -46.8 |
| Dec-25 | 1.643 | -52.9 |
| Feb-26 | 1.628 | -54.3 |
| Mar-26 | 1.617 | -55.4 |
| Apr-26 | 1.631 | -54.0 |
| Source: MNI/Bloomberg. | ||
US STOCKS: Morning Equities Roundup: Chip Makers, Oil & Gas Lagging
- Stocks hold mild to modestly weaker ahead midday Tuesday, inside relatively narrow ranges as Eminis snap a six day winning streak with IT and Energy sectors underperforming. With limited data, investors focused on upcoming earnings from Modine Mfg, Toll Brothers, Palo Alto Networks, Viasat and Evolv Technologies Holdings after the close.
- Currently, the DJIA trades down 89.66 points (-0.21%) at 42701.78, S&P E-Minis down 22 points (-0.37%) at 5960.25, Nasdaq down 85.5 points (-0.4%) at 19128.9.
- Semiconductor makers weighed on the tech sector early Tuesday, laggers include Super Micro Computer -2.92%, Arista Networks -1.84%, NVIDIA -1.64% and Fair Isaac -1.61%.
- Oil, gas and services shares weighed on the Energy sector: Texas Pacific Land Corp -2.43%, Baker Hughes -1.00%, Targa Resources -0.89% and ConocoPhillips -0.88%.
- On the positive side, electricity providers led gainers in the first half: Eversource Energy +3.78%, Dominion Energy I+2.65%, Entergy Corp +1.37% and NextEra Energy +1.08%.
- Meanwhile, retailers and food producers buoyed Consumer Staples: Dollar General +4.02%, Dollar Tree +2.96%, Kroger +1.86% and J M Smucker +1.79%.
MNI EXCLUSIVE: Former State Secretary on higher German defence spending
Former State Secretary and German Finance Ministry chief economist speaks to MNI about higher defence spending.- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
