Here are some critical issues to watch around the globe over the coming month:

Highlights: European markets are shaken by political uncertainty in Italy and Spain, increasing fears over the future of the Eurozone and possibly the EU. The Turkish Central Bank simplifies its rates system in a move to spur investor confidence, however caution over the political environment in Turkey is still necessary. Trade tensions remain high between the US and China as the tit-for-tat trade war continues, while progress towards a US-North Korea peace summit continues, despite Trump’s “cancellation” last week. The Brazilian trucker strike continues to escalate, affecting soybean exports.

European markets shaken by political instability in Italy and Spain 

After elections in March that resulted in no clear winner, Italy’s Five Star Movement and the Lega Norde party attempted to form a populist Eurosceptic coalition government but abandoned these efforts after Italian President Sergio Mattarella vetoed their choice for finance minister. As a result, the proposed prime minister, Giuseppe Conte withdrew his bid for the premiership. President Mattarella appointed former IMF official Carlo Cottarelli as interim prime minister instead. It is likely that Cottarelli will lose a parliamentary vote of confidence, resulting in new elections as early as September. Italy is the eurozone’s third largest economy but has remained unstable since the Eurozone debt crisis in 2010-2011. European markets have responded negatively to the recent political instability. Investors should watch carefully as sell-offs in Italian bonds continue, affecting the cost of borrowing for the government and impacting the share price of Italian banks exposed to government debt and too many non-performing loans. Italy has the second highest level of debt of any Eurozone member. The Italian crisis could contribute to additional downward pressures for the Euro.

Political instability in Spain is also contributing to instability in European markets. Spanish Prime Minister Mariano Rajoy faces a vote of confidence on June 1^st. The combination of Spanish and Italian instability represents a danger to the cohesiveness of the EU.

Elections in Iraq illustrate desire for less Iranian influence  

Shia leader Muqtada al-Sadr and the Sairoon coalition – a coalition of several leftist Iraqi parties – have been confirmed as the winner of Iraq’s recent parliamentary elections. Al-Sadr’s coalition has been outspoken in its criticism of any foreign interference in Iraq. Some observers interpret Al-Sadr’s platform as an effort to “exclude Iranian interests from policy considerations.” However, other coalitions, such as the Fatah and the State of Law coalitions could limit Al-Sadr and the Sairoon coalition’s . Iran seems to have suffered a blow from this election. The Iraqi elections could indeed be an indicator that Iran is becoming more isolated regionally. This will likely result in continued geopolitical instability in the Middle East, particularly as tensions between Iran, Saudi Arabia and Israel continue to grow.

Turkish central bank simplifies rates

Turkey’s central bank wants to portray independence from Erdogan. The currency plummeted to record lows last week due to concerns that the economy was overheating and that the central bank was unable to act independently to keep rates down. Erdogan has blamed the country’s currency fluctuations on foreign investors. It will be worth watching whether the currency troubles have any impact on the elections set for the end of . Turkey’s economic fragility and political instability should be of concern to investors.

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