18 Feb 2013

Ripples foreseen from Italian election

7:01 am on 18 February 2013

Ripples from the Italian election this week could be felt on the New Zealand stock market and the exchange rate.

Former premier Silvio Berlusconi is promising that if he gets back into power, he will remove the austerity measures devised by prime minister Mario Monti unelected technocrat.

Last month, the Italian stock market dived on news that Mario Monti was resigning as prime minister and Mr Berlusconi was planning to make a come back after his fall from power and grace in 2011.

JB Were investment strategist Bernard Doyle said the Italian election could provide some turbulence after a very nice run in the local and global equity markets.

As at the end of January, the New Zealand sharemarket was up 28% over the last 12 months, which coincided with the problems in Europe settling down.

Mr Doyle said some of the promises that Mr Berlusconi has been making are unrealistic and the markets react to this.

He said Italy has had a settled year or so and been able to borrow money because it's shown the world that a rational person is in charge who is taking steps to put the country on a more sustainable fiscal path.

But Mr Doyle said any sign that this is going to be unwound will have a negative effect.