Italian stocks weigh down Europe as political worries fester

  • Written by MarketWatch
  • Published in Economics

Italian stocks turned sharply lower on Monday, acting as a deadweight on other European markets as investors looked at the increasing possibility of new elections for Italy, while political uncertainty also swirled around Spain.

But investors may see thinner volumes than normal as London markets closed for a bank holiday and U.S. markets will shut in observance of Memorial Day.

Read: Which markets are closed on Memorial Day?[1]

What are markets doing?

The Stoxx Europe 600 Index SXXP, -0.28%[2]  fell 0.4% to 389.41. The index fell 0.9% last week, breaking an eight-week winning run that had been the longest positive stretch since June 2014.

In a turbulent session, Italy’s FTSE MIB index I945, -2.13%[3]  shed initial opening gains to drop 2.5% to 21,851.74. The index has been on a roller-coaster ride in recent sessions as two antiestablishment parties — 5 Star Movement and League — that recently decided to form a coalition after March elections have been attempting to form a government. The index tumbled 4.5% last week.

Spanish stocks also tripped by the afternoon, with the IBEX- 35 index IBEX, -0.50%[4]  dropping 0.8% to 9,743.70 amid questions about the stability of the ruling government.

Following suit, Germany’s DAX 30 index DAX, -0.48%[5]  fell 0.7% to 12,848.62, while France’s CAC 40 PX1, -0.62%[6]  shed 0.8% to 5,500.93. Portugal’s PSI 20 Index PSI20, -1.62%[7]  slid 1.7% to 5,513.76.

The euro EURUSD, -0.2233%[8]  turned lower against the dollar by the afternoon, dropping to 1.1609, from $1.1645 late Friday.

What is driving markets?

On Monday, Italian President Sergio Mattarella asked former International Monetary Fund official Carlo Cottarelli to try to form a new government. Paolo Savona, an 81-year-old economist and former industry minister who had been up for the post...

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