Plans by Italy’s new populist government to loosen the budgetary belt a few notches roiled markets in Europe.
With the spending plans putting the Italian government on a collission course with the European Commission, Milan took the brunt of the blow in equity markets, dropping by more than 4.6 percent at one point on Friday. s
The Euro zone STOXX 50 index on Friday lost 1.4 percent to hit 3,399.2, a drop of 0.9 percent for the week, while the STOXX 600 was down 0.8 percent, sitting at 383.18 at the close, a 0.3 percent decline for the week
Thursday’s budget deal that calls for a 2.4 percent deficit for the next three years came after warnings from the EU to rein in spending, and vastly exceeds the 0.8 percent deficit foreseen by the previous, centre-left government.
“The Italian budget continued to cast a shadow over the markets on Friday, setting up a rocky end to a rocky month,” said Connor Campbell, financial analyst at Spreadex trading group.
“Investors are distancing themselves from Italian bonds and stocks, and risk-off sentiment is spreading across Europe,” said David Madden, a market analyst at CMC Markets in the UK.
“The severe sell-off in European financial stocks is reminiscent of the eurozone debt crisis,” he added.
The trading of shares in some Italian banks was briefly suspended amid heavy price falls, with Banco BPM leading the way down with a drop of 9.4 percent.
The top two Italian banks, UniCredit and Intesa Sanpaolo, lost 6.7 and 8.3 percent respectively.
Insulated from concerns over Italy and the euro zone, the top UK index ended the month with a 1 percent gain, but was down 1.6 percent on the quarter after three months of turmoil in Brexit negotiations.
The FTSE 100 on Friday fell 0.5 percent to 7,510.2, a 0.3 percent increase for the week.
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