Italian budget concerns weigh on Europe

Global stocks slipped Tuesday, as investors refocused on Italian political risk and Washington’s trade spat with Beijing.

While investors boosted U.S. stocks at the start of trading Monday in the wake of a revision of the trade agreement between the U.S. and Canada, that optimism had softened by the end of the day and equities indexes in Asia and Europe largely fell Tuesday.

The Stoxx Europe 600 fell 0.7% in early trading, with the index’s banking sector down 1.4%.

A fresh wave of political uncertainty stung Italian assets after the country’s lower house budget head Claudio Borghi said in a radio interview that Italy “would resolve the vast majority of its [economic] problems” if the country had its own currency. That followed the Italian antiestablishment government’s announcement last week of a budget plan that investors fear has put it on a collision course with the European Union.

Italy’s FTSE MIB index on Tuesday slid 1.2% and the yield on 10year Italian bonds jumped to 3.398% from 2.932% on Monday, while the yield on two-year bonds rose to 1.533% from 1.005%. Yields move inversely to prices.

The Italian government last week widened its budget-deficit target for the next year, stating its aim for a budget deficit of 2.4% of gross domestic product—triple what the previous government had planned. A spokesperson for Italy’s economy minister Giovanni Tria said late Monday the minister had returned early to Rome from a meeting abroad to finalize work on the country’s budget.

U.S. futures put both the S&P 500 and the Dow Jones Industrial Average on course for opening losses of 0.3%, respectively. The downbeat mood echoed weak trading in Asia-Pacific, although Japan’s Nikkei was one of the few indexes to climb, rising 0.1% to a fresh 27year high.

In commodities, the price of Brent crude oil was flat at $84.96 a barrel, remaining close to its fouryear high, and gold prices rose 0.4%.