Markets rattled by Italian and Spanish political turmoil - business live

Eurozone crisis rears its head again with prospect of new elections in Italy and vote of no confidence in Spain

2.51pm BST

The turmoil over the failed Italian coalition, with the prospect of new elections in the autumn, has revived memories of the crisis which engulfed the eurozone over Greece. Investors have taken fright that Italy might effectively vote to leave the euro, sending markets and bond prices tumbling.

And on top of that, there is concern over Spain, where the government faces a no confidence vote on Friday.

2.43pm BST

Could this be a slap on the wrist from the President of the European Council for some of the earlier comments from the ECB and EU?

My appeal to all EU institutions: please respect the voters. We are there to serve them, not to lecture them. #Italy @dwnews

2.35pm BST

The global market slump in the wake of Italy's latest political problems has spread to the US, with Wall Street opening sharply lower.

The Dow Jones Industrial Average is down 190 points or 0.7% while the S&P 500 fell 0.6% at the start of trading and the Nasdaq Composite losing 0.4%. US Treasury bonds, one of the perceived havens for investors in times of turmoil, have moved higher, with the 10 year yield conversely at the lowest level since April.

1.40pm BST

It's not just Italy causing concern of course:

#Spain's yield spread widening to German #bunds may not be as fast as #Italy, but still takes 10-year Spanish Bono yield to 1.662, up about 470 basis points since end March 1/ ^KO

1.00pm BST

At times like this it is worth looking at the VIX index - the so-called fear index which shows investors' expectations of near term market volatility.

So far today it has jumped 17% to 15.49, the highest level since the beginning of May.

12.43pm BST

Unless there is something lost in the translation here, this appears to be another unhelpful comment, this time from EU commissioner Gi1/4nther Oettinger:

'The markets will teach the Italians to vote for the right thing', told me #EU commissioner #Oettinger in an exclusive interview in Strasbourg. More on @dwnews (full interview tonight at 21.00 DW/German) pic.twitter.com/oVPOPIMBUd

12.28pm BST

As the Italian crisis continues, billionaire financier George Soros is in a negative mood about the EU in a speech today:

Another "major" financial crisis may be looming and the EU faces an imminent existential threat, George Soros says https://t.co/Jkw1Rhq6Tk pic.twitter.com/TgzF12JRu9

12.07pm BST

As the Italian crisis grips investors, markets had become complacent in the wake of the QE support programmes from the world's leading central banks, says Premier Asset Management's Jake Robbins:

The Presidential rejection of a democratically elected coalition government has thrown Italy into a constitutional crisis, one made worse given it was because of the coalition's anti EU beliefs. In echoes of the euro crisis earlier this decade, these events could ultimately threaten the future of the EU, or at the very least, question it in its current form.

Whilst it is no surprise that Italian yields have soared and equities plunged as investors reprice the actual risk of holding Italian assets, this crisis has been on the cards for some time and shows how complacent financial markets have become in the era of quantitative easing. At the same time there has been a noticeable slowdown in growth across the EU this year which will also continue to weigh on sentiment towards both Italian and EU wide assets. Throw in heightened geopolitical risks in other parts of the world such as the US and Asia, rising interest rates and the reduction in central bank support through quantitative easing, then the outlook for financial markets is far less certain than over the past few years.

11.35am BST

Here's Reuters' latest report on the volatility in the markets:

A deepening political crisis in Italy, the euro zone's third biggest economy, fuelled a heavy selloff in Italian assets and the euro reminiscent of the euro zone debt crisis of 2010-2012.

Short-term Italian bond yields, which move inversely to price, were set for their biggest one-day jump since 1992, while Italian and wider euro zone banking stocks were set to suffer their worst day since August 2016.

11.29am BST

Earlier Italy sold a5.5bn worth of six month bonds, but at the highest yield for more than five years.

Amid the turmoil surrounding the country's political future, it sold the expected amount of bonds but at a yield or interest rate of an average 1.213%. At the previous auction for this maturity the yield was negative at -0.421%.

11.09am BST

US markets are expected to open lower in the wake of the European declines, with the Dow Jones Industrial Average forecast to lose around 190 points at the start of trading.

11.03am BST

Not sure this is an entirely helpful remark from the European Central Bank's Vitor Constancio. When asked about any ECB help for Italy he is quoted as saying: "Italy knows the rules. They might want to read them again."

Reuters reports:

Any intervention by the European Central Bank to help Italy in the event of liquidity problems must meet the bank's mandate and "certain conditions", its outgoing Vice-President was quoted as saying on Tuesday.

"Italy knows the rules. They might want to read them again," Vitor Constancio told Spiegel magazine in an interview, according to a pre-release, when asked if the central bank would intervene if needed and rescue Italy from insolvency.

10.37am BST

Back with the markets, and analyst Joshua Mahony at IG, says:

With markets transfixed on affairs in Italy and Spain (amid a vote of no confidence for Rajoy), we are seeing a sharp shift into safe haven assets, driving the Japanese yen and gold prices higher in recent days. FTSE 100-listed gold producers Fresnillo and Randgold are the best performers in the bluechip index in early trade amid a shift into gold. We often see stocks benefit when currencies come under pressure, but the flight to safety this morning means the euro and the pound are also getting another pounding alongside the stock market declines.

10.21am BST

Away from markets for a moment, and some good news for Pret A Manger employees after the takeover deal, as tweeted by the chain's chief executive:

Today is a big day for @Pret. As we welcome JAB, we'll be thanking the people who really matter by giving each of our 12,000 employees 1,000 when the deal completes

10.09am BST

Moody's, which recently put Italy's Baa2 credit rating on review for a downgrade, has commented on the latest developments.

It said Italy was likely to be downgraded if the next government pursued fiscal policies which were not sufficient to place the public debt ratio on a sustainable downward trajectory in the coming years.

Moody's: We will conclude the review when we will have better visibility on the policy direction of the country, which means that the time frame for the review may exceed the typical period of up to three months.

10.04am BST

Not even during the 2010-2012 Eurozone crisis did Italian yields rise so rapidly in just a few hours of trading. pic.twitter.com/yV884hZZ6A

10.02am BST

Neil Wilson, chief market analyst for Markets.com, says:

We've seen a steep selloff in risk assets as the Italian political troubles deepen, with investors seemingly dumping their exposure to Italy. Whilst a lot has already been written on the topic, the moves this morning warrant attention as we are seeing some incredible price action in Italian bonds with the market moving at speeds not seen since the worst of the Eurozone debt crisis.

The big question is whether this is just an Italian problem or one that risks significant spill-over into the rest of Europe. The one thing that has become apparent is that markets treated the election result with excessive calm and has been jolted by the populists' success in agreeing terms...

9.59am BST

The head of Italy's central bank has said the country's economy is recovering and growth is increasingly self sustained, but said any move to weaken the country's public finances could undermine confidence and years of valuable reforms.

Ignazio Visco, speaking to the bank's annual meeting, made the comments amid the political turmoil which is likely to lead to a new election, with euro membership likely to be among the main issues for voters.

9.51am BST

The market rout is intensifying, in the wake of the Italian political crisis.

The FTSE 100 is now down nearly 120 points or 1.5%, Germany's Dax is down 1.6% and France's Cac has fallen 1.87%.

Ooft. Italian 2-year yield up 126 bps today, blowing away even the biggest increases at the height of the 2011-12 euro debt crisis. This is on course for the biggest one-day rise since Sept 1992. pic.twitter.com/Eh7e37QNmG

9.10am BST

It may not have taken in the latest developments, but the recent political uncertainty in Italy has hit consumer confidence.

The confidence index fell to 113.7 in May, the lowest since August last year and below the 116.5 level expected by analysts. The April figure came in at 116.9.

9.03am BST

Oops! #Italexit back in the spotlight. #Italy's likelihood of leaving the Euro more than tripled from 3.6% to 11.3%. So, the troublesome calm in the euro zone is a thing of the past, Sentix says. pic.twitter.com/lPLDim3sXT

8.47am BST

Time to call this a crisis, says Kit Juckes of Societe Generale:

Having rejected the NL/5-star leaders' nomination of Paolo Savona as [Italian] Economy Minister, President Mattarella has called on Carlo Cottarelli to form an interim administration.

His chances of succeeding are slim and elections are likely in September. Which leaves us 3-4 months of uncertainty ahead of a vote that may be seen as a referendum on Euro-membership. The threat of further rating downgrades hangs over the BTP [Italian bond] market (and is largely priced-in), and the European Central Bank's plans for providing forward guidance on policy normalisation are up in the air. Which means that the risk of EUR/USD reaching 1.10 by the end of the summer is significantly higher than the possibility of a recovery to 1.20.

8.25am BST

As expected the threat of a new eurozone crisis - this time involving Italy and/or Spain rather than Greece - has sent markets sharply lower in early trading.

The FTSE 100 is down 0.78% at 7670, while Germany's Dax has dropped 0.6% and France's Cac 0.69%.

8.13am BST

More on the sale of ubiquitous sandwich chain Pret A Manger:

Pret a Manger, the British sandwich shop chain, is being taken over by the German-controlled company behind Krispy Kreme donuts and Kenco coffee in a deal worth more than 1.5bn.

Bridgepoint, the UK-based private equity firm, has agreed to sell Pret to the investment group JAB Holdings, which has been rapidly acquiring companies linked to the coffee market in recent years.

Related: Pret a Manger sold for more than 1.5bn to Krispy Kreme owner

8.10am BST

Back with Italy, and bond yields are continuing to leap higher:

#Italy this morning. 2y government bond yield at almost 2%. Was -0.19% at the start of the year. Increased a full percentage point in one night. pic.twitter.com/DTrqr1b3U9

8.06am BST

The unscheduled trading statement from Dixons Carphone shows it now expects profits of around 300m in its next financial year, well below the 387m expected by analysts.

It forecast the UK electrical market would contract, and new broom chief executive Alex Baldock - eight weeks in the job - seemed to take a swipe at previous management when he said:

We will correct recent underinvestment in both our colleague and customer proposition. In the coming year we expect to make a cost investment of around 30m in these areas across the UK and Ireland, giving our colleagues the right tools and the customer an improved experience.

The share price of Dixons Carphone has been recovering strongly since new CEO Alex Baldock took over, on the back of vibes about strong trading ahead of the World Cup. But, out of the blue, the company has come out with a profit warning today! The issue appears to be that although headline of PBT of 382m for y/e April will hit City expectations that will be only down to an odd one-off 25m systems implementation benefit, given gross margin pressures in Q4. And the company has come out with detailed guidance for the year that has just started, y/e April 2019, warning of a fall back to headline PBT of 300m! That is partly because of the impact of one-off items, but also reflects continued problems in the mobile phone business (despite the much-vaunted talks with the networks about better terms) and, amazingly, a 30m hit to "correct recent underinvestment in both our colleague and customer proposition". After all that, investors may not be in much of a mood to listen to the new CEO's assertion that "though there's plenty to fix, it's all fixable"...

7.53am BST

Italian bond yields have jumped on the political turmoil engulfing the country, with the two year yields rising above 1% for the first time since 2014.

7.49am BST

The euro continues to come under pressure, falling to its lowest level since November 2017 against the dollar.

It is down 4% so far this month at $1.159, and is also at a new six and a half month low against the Swiss franc. It has fallen 0.1% against the pound.

7.43am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It's been a little while, but the eurozone looks like it could be heading towards another period of turmoil. And it is not Greece this time.

Related: Italian president names interim prime minister until fresh elections

The overriding problem for investors is that these are two of the largest, most important economies in the eurozone. Euro traders are aware that the potential fallout from Italy mainly, but also this Spanish headache, dwarfs the fallout which could have been following the Greek debt saga and as a result the euro has fallen heavily out of favour and has continued to decline overnight. With potential elections just around the corner in both Spain and Italy, a summer of volatility now seems almost a given.

European Opening Calls (with FTSE revised):#FTSE 7692 -0.50%#DAX 12811 -0.41%#CAC 5492 -0.31%#MIB 21809 -0.56%#IBEX 9732 -0.33%