The situation in Europe still remains explosive even though Italy now has a new prime minister. Last week, the yield of Italian public bonds exceeded the level of seven percent. The events that were supposed to happen in the summer of 2011 (if it was not for the support from the European Central Bank) have happened now and affected the markets negatively.
Elena Turzhanskaya, an analyst with Kalita Finance, told Bigness.ru that international stock exchanges showed an immediate reaction to the change of the bond yield. They dropped by two or three percent by the end of the day. The panic on the markets made the volatility index (VIX), the so-called index of fear, jump 31 percent up. The euro rate collapsed vs. the dollar by more than two percent to 1.3521 vs. 1.3820 the day before.
As a result, the price on Brent oil slipped to $112 per barrel. The markets of industrial and precious metals also showed a correction.
"The situation on the markets can be described as highly intense. The European Central Bank took measures on Thursday, but they failed to give an incentive to the growth of the leading indexes. European markets showed a very weak positive reaction of 0.1-0.6 percent. American markets showed a more considerable growth owing to the favorable macrostatistics on the labor market and the data about the export surplus in September," the expert said.
As for the Russian market, the external factor is a decisive one. The increase of volatility on all exchanges will be preserved in the foreseeable future. One should not expect considerable growths on either foreign or Russian markets.
The situation on the international currency market was far from being stable last week. The euro was traded on high positions - 1.37-1.38 vs. the dollar. "However, the higher you climb, the harder you fall. On Wednesday, the basic dollar-euro currency fell down to 1.3520. The effect from verbal interventions is smaller and smaller. Emergency summits have become a tradition already, and no one expects anything from them. The threat of the sovereign default has been growing, which may send the euro down to 1.32. Such assets as the Japanese yen and the Swiss franс have been conserved by national central banks, which leads to the universal growth of the dollar. The Russian ruble has lost 1.3% vs. the dollar in a week to 30.6 rubles per one dollar. The Russian ruble is expected to decline despite high oil prices, because the state of affairs on international markets puts pressure on the currencies of developing countries," Elena Turzhanskaya said.
As for the political aspect of European problems, Italy is doing its best to solve its problems as quick as possible. Mario Monti, the new prime minister, has started forming the new cabinet of ministers. Silvio Berlusconi stepped down from his position during the weekend after the lower house of the Italian parliament failed to agree on the complex of measures of the bailout program.
When leaving, Berlusconi stated that he was not going to give up until Italy is renovated. Berlusconi is one of Italy's richest men, so he means what he says.
The new prime minister of the country will have a hard task to take Europe's third largest economy from the crisis. The industrial production of the country demonstrates no dynamics, the GDP has been slowing down, whereas the unemployment rate is high. Mario Monti is en economist, his work experience is extensive, so one may expect an improvement.