Italian domestic politics hits shares across Europe

Italy’s unsettled domestic politics was spilling into the London market after three days of rest and affecting the start of trading Tuesday morning with the FTSE 100 opening down 0.8% at 7,668.42. The euro-zone’s third largest economy has been struggling to form a full government since elections in March with coalitions forming and falling apart several times which is likely to end up with a new election being called in September.

Italy’s unsettled domestic politics was spilling into the London market after three days of rest and affecting the start of trading Tuesday morning with the FTSE 100 opening down 0.8% at 7,668.42. 

The euro-zone’s third largest economy has been struggling to form a full government since elections in March with coalitions forming and falling apart several times which is likely to end up with a new election being called in September.

Euro under pressure as crisis engulfs Italy

The euro was looking frail, trading at a 6-month and heading lower against major currencies as Italy’s domestic strife cast a dark cloud over Italy’s relations with the EU. 

At the beginning of the week the country’s president refused to accept a euro-sceptic as economy minister and instead appointed Carlo Cottarelli, a former Monetary Fund official to the position of interim prime minister.  

The feud at the helm of Europe’s third largest economy prompted a selloff on Italian markets on Monday and continued on all main European bourses Tuesday morning. The pound is not in a much better shape this morning, dropping to multi-month lows against the dollar, yen and the Swiss franc.

Oil under pressure as Saudi and Russia discuss potential output hike

Oil prices are heading lower as markets brace themselves for the option that Saudi Arabia and Russia, the two largest producers of black gold, might increase production by 1 billion barrels a day between them to cover a potential shortfall.

The two oil big hitters started having discussions about pumping more oil as Iran, member of the oil cartel OPEC, heads for potential export problems in the wake of intensified US sanctions against the country initiated by President Trump.

Fellow OPEC member Venezuela could also end up facing sanctions from the EU over claims that its recent election was neither free of fair which could potentially result in production problems and less oil leaving the country. 

BP and Shell shares both took a hit this morning, trading down 1.3% and 1.1%, respectively, as traders kept an eye on the declining oil price.

Banking shares in focus over RBS sale talks

The UK government is looking into selling a relatively small stake in the Royal Bank of Scotland but a stake that could be worth several million pounds. 

The Scottish lender is mainly government owned with a 70% stake being held by the state and could see about 10% being sold later this year. 

Banking stocks did not take the news too well and both RBS and Barclays responded with declining prices.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.