The Eurozone indices took a dive on Friday, as investors continued to process the news that the European Union officials had struck down the Italian government’s controversial budget.
Mulling over Italy’s proposals for just a tad more than 48 hours, the European Commission didn’t hold back when criticising the debt-ignoring budget, labelling it an ‘unprecedented’ violation of EU rules. ECB chief Mario Draghi also implicitly put the boot in, saying that ‘there is no evidence that to undermine all the rules will lead to prosperity’.
This only increased the market’s fears that a more dramatic showdown between the actors could come down the road, especially if the Italian coalition bite back with their response (which they have until noon on Monday to deliver). With the country’s bonds back in trouble – Italian bond yields hit a 4 year high – the Eurozone indices continued to suffer; the DAX dropped 90 points, pushing it back towards 11500, while the CAC fell 1.1% and the FTSE MIB slid 1.5%.
Despite its own EU-related issues, the FTSE managed to avoid properly joining in with the Eurozone losses, instead dipping just 0.1%. Sterling, meanwhile, was basically unchanged, remaining at a 2-ish week low against the dollar following a rough few sessions.
Turning to this afternoon and the Dow Jones doesn’t look like it is going to add much to the overall narrative, with the futures pointing to a 40 point increase when the bell rings on Wall Street.
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