Italian Budget Blues Infect European Markets, Euro Under Pressure

The Italian budget continued to cast a shadow over the markets on Friday, setting up a rocky end to a rocky month.

With the FTSE MIB truly losing its head, seeing its losses widen from 2% to 3.5% as the Italian banking sector collapsed, its eurozone peers couldn’t avoid infection. The DAX dropped nearly 200 points to plunge below 12250, while the CAC shed 0.7% as it ducked under 5500. The euro was almost as distressed, losing 0.3% against the pound and 0.6% against the dollar, hitting one week and 18 day lows respectively.

Having initially avoided a significant decline, the FTSE found itself embroiled in the same contagion-fearing trading as the eurozone. With the likes of Barclays (LON:BARC), Lloyds (LON:LLOY) and RBS (LON:RBS) down anywhere between 2% and 3%, the UK index fell half a percent, a slide that pulled the FTSE from its one month highs but wasn’t enough to send it below 7500. The pound, meanwhile, couldn’t pair its gains against the euro with a similar movement against the greenback, instead dropping 0.3% to hit a 2 week low of $1.305.

Turning to this afternoon and at the moment the Dow Jones looks set to dodge the kind of losses seen in Europe, with the futures suggesting a milder 0.2% decline. That would take the Dow the wrong side of 26400, though that’s still around 400 points higher than where it started the month.

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