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June, 2018 9:19 PM



Global stocks, euro rocked by Italian turmoil

Global stocks, euro rocked by Italian turmoil

US and European stock markets and the euro plunged again Tuesday as political uncertainty in Italy stoked fears about the country potentially crashing out of the eurozone.

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30.05.2018 08:01 AM

US and European stock markets and the euro plunged again Tuesday as political uncertainty in Italy stoked fears about the country potentially crashing out of the eurozone.

Asset prices came off the day's worst levels briefly as Italian top bankers called for calm, saying the economy is in decent shape despite political jitters, but then slid again towards the close.

Worries that Spain also is entering political crisis sparked further nervousness about the finances of the eurozone's southern flank.

The Milan and Madrid stock exchanges closed the day sharply lower, as did all the main European equity markets.

"The fear of another election and political uncertainty in Italy is driving significant losses throughout Europe," said Joshua Mahony, market analyst at IG traders.

Italy's 10-year bond yields surged to more than 300 basis points above Germany's, reflecting investor worry over the prospect of a fresh eurozone crisis.

Bankers tried but failed to stop the hemorrhage.

'Only emotional'

"There can be only emotional reasons for what we are seeing on the markets today," Bank of Italy Governor Ignazio Visco said.

And Carlo Messina, CEO of the Intesa Sanpaolo bank, said "frankly, the fundamentals of the country a very solid" so the market movements were "completely disconnected" from the fundamentals.

The euro meanwhile struck the lowest level against the dollar since last July.

Italy, the eurozone's third-biggest economy after Germany and France, has been plunged into crisis with President Sergio Mattarella at the weekend vetoing the nomination of a fierce eurosceptic as economy minister.

The move led the prime minister-designate to step down, scuppering the bid by the anti-establishment Five Star Movement and the far-right League to form a government.

'Heightened uncertainty'

Mattarella then named Carlo Cottarelli, a pro-austerity economist formerly with the International Monetary Fund, to lead a technocrat government, with another election likely in the autumn.

The chaotic developments have spooked investors, who fear another election could see a better result for the essentially anti-EU parties.

"We may now be in for an extended period of heightened uncertainty ahead of fresh elections," Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney, said in a note to clients.

Adding to the selling pressure was a brewing crisis in Spain, where Prime Minister Mariano Rajoy faces a no-confidence vote after his party was found guilty of benefiting from illegal funds in a massive graft trial.

US stocks also fell sharply, with the Dow dropping 2.0 percent at one point, as financial shares felt the burden of uncertainty over Italy. 

Karl Haeling of LBBW pointed to numerous other items on the global worry list, including ongoing trade frictions between the US and China, anxiety over the US pullout of the Iran nuclear deal and the chaotic back-and-forth between the US and North Korea over nuclear talks.

"Geopolitically, the world is a bit of a mess right now," Haeling said.

Key figures around 2100 GMT

Milan - FTSE MIB: DOWN 2.7 percent at 21,350 points (close)

Madrid - IBEX 35: DOWN 2.5 percent at 9,521.30 (close)

London - FTSE 100: DOWN 1.3 percent at 7,632.64 (close) 

Paris - CAC 40: DOWN 1.3 percent at 5,438.06 (close) 

Frankfurt - DAX 30: DOWN 1.5 percent at 12,666.51 (close) 

EURO STOXX 50: DOWN 1.6 percent at 3,428.14 (close)

New York - DOW: DOWN 1.6 percent at 24,361.45 (close)

New York - S&P 500: DOWN 1.2 percent at 2,689.86 (close)

New York - Nasdaq: DOWN 0.5 percent at 7,396.59 (close)

Tokyo - Nikkei 225: DOWN 0.6 percent at 22,358.43 (close)

Hong Kong - Hang Seng: DOWN 1.0 percent at 30,484.58 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,120.46 (close)

Euro/dollar: DOWN at $1.1537 from $1.1661

Pound/dollar: DOWN at $1.3258 from $1.3312

Dollar/yen: DOWN at 108.68 yen from 109.55 yen 

Oil - Brent Crude: UP 9 cents at $75.39 per barrel

Oil - West Texas Intermediate: DOWN $1.15 at $66.73 per barrel 
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