Prospects for a quiet summer look slim in Italy. Tensions between the coalition partners will rise as expensive election promises, fiscal reality and the finance bill collide. We remain short BTPs, targeting a move up to 3.5-4.0%.

The Trump protectionist threat is the most likely cause of the next financial rout. The rot will start in equity markets, with the US at the fore. Then it will spread. Bonds will not escape, with the US facing the reality that its insatiable appetite for foreign funding will have to happen at higher interest rates and after the dollar has fallen. This is, of course, bad for emerging market assets and currencies.

Prime Minister Theresa May has long insisted that the UK would leave both the Single Market and the Customs Union. Navigating between those who want a “soft” Brexit and those who want to leave the EU without strings attached is becoming increasingly difficult. With time running short, upcoming votes in Westminster and an EU Summit in Brussels could make her position untenable. We reaffirm our negative stance on sterling.