We're four days away from the "sequester" spending cuts, but it's Europe coming unglued today. The split election results in Italy has has resulted in a split parliament between Bersani's center-left coalition and Berlusconi's center-right coalition. Bersani has control of the lower house, and Berlusconi's people will control the Senate. Berlusconi campaigned on repealing the taxes the previous government imposed in an attempt to stop the financial collapse of the country. The election results have caused a flight out of the euro and Italian/Spanish bonds and into German and U.S. bonds, the dollar, and gold. Some analysts predict Italy leaving the EU if austerity measures are revoked. The euro is trading near a 7-week low.
In Japan, the Nikkei index is down over 2% and the yen is up over news of the Italian impasse. Hong Kong markets closed at the lowest point this year, and Chinese stocks gave up early gains to close at the lowest point in a month as well.
On Wall St., stocks are up on the flight out of Europe, and the dollar is trading near the six-month high set yesterday. Oil is weaker, hitting a two-month low overnight. Despite these downward pressures, the fear coming out of Europe helped gold spike to hit briefly hit $1,600 on the London open, and was trending above $1,590 in early U.S. trading.
More eyes are on Fed Chairman Ben Bernanke's testimony before Congress today than are following the sequester posturing in Washington. If he confirms easy money policy/money printing will continue, worries of currency debasement and future inflation will be bullish for gold.