Italy Scares the Markets after Calls to Leave the EU

Stocks fell worldwide and European assets were sold off on today following anti-euro comments from the Italian lawmaker Claudio Borghi.

Claudio Borghi, who leads the economic policy of Italy’s ruling party, said in an interview "I am truly convinced that Italy would solve most of its problems if it had its own currency,". His comments pushed the yield on the 10-year Italian bond to rise to 3.40 percent at about 8 a.m. London time, which is it's highest level since March 2014. This follows comments in May which caused a sell-off.

As a result, Italy's main index also fell around 1.5 percent and shares in Italian banks went into the red, with Banco BPM falling 5 percent, UniCredit down 3.2 percent and Intesa Sanpaolo fell 2.7 percent. There are also concerns that increased public spending will disrupt public debt reduction of public debt which amounts to about 2.3 trillion euros ($2.6 trillion).

Leading economists have commented that they do not expect systemic implications for the global economy, although risks have risen, European risky assets remain vulnerable and there is potential for a negative spill over to the Euro area given the high trade exposure to Italy. The euro extended losses to fall 0.6 percent to its lowest since August 21st and is trading at trading at $1.150.

The aftermath of today's events have resulted in differing opinions with accusations towards the EU of "creating terrorism on the markets" whilst others are urging the Italian government to " tell the truth to the Italians, that there is more public expenditure". As it stands the markets must wait until October 15th where Italy will finalise its 2019 budget plan and submit it to the European Commission for analysis. The markets will be eagerly awaiting the budget which is likely to have heavy implications on the markets direction. 

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