European stocks finished sharply lower Tuesday, led by a selloff in Italian equities. Investors were assessing the prospect of new elections in Italy, which could effectively serve as a referendum on the euro.
Meanwhile, political uncertainty in Spain hit Madrid-traded stocks, as Prime Minister Mariano Rajoy’s struggle to stay in power raised fears of new elections.
What markets are doing
Italy’s FTSE MIB index I945, -2.65% tumbled 2.7% to end at 21,350.88. Investors also fled Italian debt, with the 2-year bond yield TMBMKIT-02Y, +157.06% recently surging to 2.42%, as prices sank. Bond prices move in the opposite direction of yields.
France’s CAC 40 PX1, -1.29% fell 1.3% to end at 5,438.06, and Germany’s DAX 30 index DAX, -1.53% sank 1.5% to 12,666.51. In London, the FTSE 100 UKX, -1.26% moved down 1.3% to finish at 7,632.64.
What’s driving markets
Worries grew that Italy will be forced to hold a new general election. The country’s president, Sergio Mattarella, on Monday blocked two antiestablishment parties from taking power by...