Italian political turmoil weighs on Stoxx Europe 600

European stocks pared earlier losses on Friday after Europe's economy commissioner said no decision had yet been taken on Italy's controversial budget plan.

Italian political turmoil has been weighing on the pan-European Stoxx Europe 600 which ended off 0.1% to 361.24, but the index managed a weekly rise of 0.6%. The U.K.’s FTSE 100 finished up 0.3% amid Britain’s own unresolved Brexit woes. Still, the stock gauge notched a weekly gain of 0.8%, largely due to weakness in the pound. Germany’s DAX 30 meanwhile, ended the session off 0.3%, but logged a weekly advance of about 0.3%. France’s CAC 40 fell 0.6%, marking a weekly decline of 0.2%, representing its fourth consecutive weekly drop.

EU Commissioner Pierre Moscovici said that no decision had been made on Italy’s budget proposal, which helped to pare steeper losses earlier in the session.

Earlier in the week, Italy’s government approved a draft budget law for next year, confirming a set of expansionary measures that could lead to a fast-rising deficit.

The planned measures included in the draft law are set to widen the budget deficit to 2.4% of gross domestic product. EU officials fear the real deficit could be much higher than 2.4%.

A clash between Rome and Brussels could further rattle European markets if it intensifies, market participants have warned.

Investors also watched U.K. Prime Minister Theresa May’s efforts to forge a new trade and customs pact with the EU as Britain is set to relinquish its membership in March. On Thursday, May indicated that an extension of the U.K.’s current EU status could come into play because of unresolved differences between the parties.

European traders also were keeping an eye on tensions between the U.S. and Saudi Arabia as Treasury Secretary Steven Mnuchin on Thursday announced that he was pulling out of an investment conference in Riyadh in response to the disappearance of Saudi journalist Jamal Khashoggi, a U.S. resident.

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