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Home / World / Italy's stock market slumps as budget drama looms, weighs on broader European bourses

Italy's stock market slumps as budget drama looms, weighs on broader European bourses



The European Union and Rome do not want to avert.

Italy's FTSE MIB Italy index

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     I945, -0.79%

was down 1.6% at 18.780, poised for a weekly skid of 2.5% and its fourth straight weekly slide, representing the longest search decline since a five-week retreat ended June 8 , according to FactSet data.

Italian political turmoil was dragging the pan-European Stoxx Europe 600

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     SXXP, -0.15%

down 0.4% to 360.17 but the index was only a weekly gain of about 0.4%. The U.K.'s FTSE 100

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     UKX, + 0.51%

what trading virtually unchanged at 7,024.22, amid Britain's own unresolved Brexit woes. The stock gauge was on track for a weekly gain of about 0.4%.

Germany's DAX 30

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     DAX, -0.01%

meanwhile, trading 0.4% lower at 11.536.54, poised for a slight weekly advance of about 0.1%. France's CAC 40

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     PX1, -0.53%

fell 0.8% to 5.075.39, tracking a weekly decline of 0.4%, which would mark its fourth consecutive weekly drop.

The euro

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     EURUSD, + 0.1222%

last traded at $ 1.1449, compared with $ 1.1453 late Thursday in New York. The British pound

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     GBPUSD, + 0.0922%

was up at $ 1.3038 from $ 1.3018 in the previous session.

Read: With 'no-deal' Brexit risk on the rise, analysts see path for pound

Yields for 10-year Italian debt

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     TMBMKIT-10Y, + 0.91%

were at fresh highs at 3.777%, as the EU cautioned Rome. Meanwhile, the yield for the 10-year German paper

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     TMBMKDE-10Y, + 0.83%

at 0.402%, hitting its lowest since September. Investors tend to turn to German bonds, or bunds, as they are during a period of uncertainty in the eurozone because the country is the largest economy in that economic bloc. Bond prices rise as yields fall, and vice versa.

Earlier in the week, Italy's government approved a draft budget law for next year, confirming a set of expansionary measures that could lead to a near-rising deficit.

The planned measures included in the draft law are set to widen the budget deficit to 2.4% of gross domestic product. EU officials fear the real deficit could be much higher than 2.4%.

The full draft budget law wants to be submitted to the Italian parliament by Saturday.

Lawmakers say they have come to the end of the year and have not approved it lead to increase in government spending.

A clash could rattle European markets if it intensifies, market participants have been warned.

Investors were watching U.K. Prime Minister Theresa May's efforts to establish a new trade and customs pact with the EU as Britain is set to become a part of its membership in March. On Thursday, May indicated that an extension of the U.K.'s current EU status could come into play because of unresolved differences between the parties.

European traders thus were keeping an eye on tensions between the U.S. and Saudi Arabia as Treasury Secretary Steven Mnuchin on Thursday announced that he is pulling out of an investment conference at Riyadh in response to the disappearance of Saudi journalist Jamal Khashoggi, a U. S. resident.

What are strategists saying?

"While there is no clear trigger behind this shift, renewed concerns about Italy's budget, disappointing earnings from industrial firms, quiet-raised U.S. Bond yields, and the prospect of a fallout in U.S.-Saudi relations may have contributed, "wrote Marios Hadjikyriacos, analyst with brokerage XM, in a Friday research note.

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