Spanish and Italian politics jolt Eurozone stock markets
Eurozone shares hit a road bump yesterday as heightened risk of a snap election in Spain piled new political anxiety on investors already shaken by the new Italian government's plans to ramp up fiscal spending.
Spanish and Italian stocks fell sharply, with peripheral banks firmly in the firing line, while German shares and Bunds - considered a safe haven - made gains as investors pulled money from peripheral Eurozone debt and stocks.
Spain stole the spotlight from Italy as pressure built on Prime Minister Mariano Rajoy, with opposition parties calling for a no-confidence vote and a snap election over a corruption case involving members of his party. This, combined with worries over Italy's new eurosceptic government, difficult global trade talks and a slowing economy, helped push Europe's STOXX 600 to its first weekly loss in two nonths.
Spain's main stock index, the IBEX lost as much as 2.4pc in a volatile day, closing the session down 1.7pc with banks leading losses. Shares in Caixabank, Santander and BBVA tumbled 2.9pc to 3.8pc.
Ireland bucked the trend, with shares in Dublin closing up yesterday.
Italian and Spanish banks saw the most intense trading in a while, with more than three times the average daily volume traded in Banco BPM and Caixabank, while Unicredit, Intesa Sanpaolo, Santander and Sabadell shares traded hands at more than twice their daily intensity.
The Eurozone's bank stock index fell 1.9pc. It was its second straight week of losses, taking it to a 13-month low.
Spanish gas and electrical utilities, sensitive to government policy changes, also fell. Gas Natural, Endesa, Acciona and Red Electrica were among top fallers, down 2.7pc to 3.3pc.
Barclays analysts said they saw a snap Spanish election as increasingly likely, but added: "It is currently very unclear what the exact path to the next election would be."
Italy's main share index sank to new seven-week lows, down 1.5pc. (Reuters)