European politics are causing tremors in financial markets

European politics are causing tremors in financial markets

Only a few minutes after the announcement on Thursday of a deal on a new anti-establishment government in Italy, one of its leaders attacked a top European official for comments he deemed racist in a fresh sign of hard relations with Brussels.

New jitters about the stability of the euro sent the currency's value against the dollar to its lowest level in nearly a year.

USA markets were closed Monday for the Memorial Day holiday. Australia's S&P/ASX 200 fell 0.6 percent to 5,999.90.

European stock markets and the euro extended losses Tuesday as political uncertainty in Italy stoked fresh fears about the eurozone.

Banks were the stand-out performers, up 3.6%. Major exporters like technology and industrial companies are also falling.

The talks were said to be focusing on a possible new post for anti-euro economist Paolo Savona, whose rejection as economy minister by President Sergio Mattarella led to the collapse of the first M5S-League government formation bid on Sunday.

The euro rallied further on Thursday as Italian parties renewed attempts to form a government, easing concerns about the wider impact of a political crisis in the euro zone's third-largest economy. In Beijing, South Korea's Yonhap news agency reported that senior North Korean official Kim Yong Chol planned to head to the United States.

Although the FTSE started the day on a slightly higher note, 0.7% at 7,726.78, looking at the up and down bounce in the index this morning it is not at all clear that the upward trend will continue.

More news: Istana may host Trump-Kim summit

In currencies, the Canadian dollar was flat and the Mexican peso was down by 0.3 percent. And since then, the market has been hit by a populist wave, starting with Greece in 2015, the Brexit vote in mid-2016 and French elections previous year. Spain's 10-year bond yield fell 3 bps to 1.46 percent, while Portuguese yields tumbled nearly 10 bps.

Spain's 10-year bond yield fell 16 bps to a two-week low of 1.33 percent ES10YT=RR, while the yield spread over Germany tightened to 94 bps compared with Wednesday's high of 134 bps.

On the foreign exchange front, the euro continued its tumble against the Singapore dollar, trading at S$1.5513.

Pedro Sanchez was nearly certain to become Spain's new leader after his Socialist party secured enough votes to force Mariano Rajoy from office in a no-confidence vote on Friday that will throw the political spotlight onto a second southern European state.

The Japanese Yen caused the Topix Index to fall for the seventh straight session, the longest such streak since September 2016.

U.S. S&P500 mini futures rose 0.5 percent, but market holidays in the world's two biggest financial centers - London and NY - could make trading slow and illiquid for the day. Brent crude, used to price worldwide oils, dropped 40 cents to $77.16 per barrel. Oil prices have slumped in the last week following reports that OPEC countries and Russian Federation could start pumping more oil soon.

ASIA'S DAY: Japan's Nikkei 225 stock index dropped 1.5 per cent to 22,018.52.

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