Italian Elections Cause Panic Amongst Spread Betting Investors
There's a sea of red across trading screens this morning as the lack of a clear victor in the Italian elections is causing panic amongst spread betting investors.
The uncertainty that this causes is enough to make anyone nervous and we are likely to see an interim administration for a number of months before fresh elections, unless a working coalition can be formed.
As we know from our own coalition, this causes little more than continual indecision and horse trading, something that the Eurozone could really do without when it comes to the likes of Italy.
It is important to remember why Italy is so important to the survival of the euro.
A couple of years ago, Silvio Berlusconi was ousted and replaced by the technocrat leader Mario Monti, whose sole aim was to reform the country.
Unfortunately, apart from the odd bit of tax tinkering here and there, this has hardly been achieved. As a result, Italy, with its massive debt mountain, remains a ticking time bomb at the heart of the Eurozone.
One thing is clear from this election and others around Europe; smaller parties are eating their way into the mainstream parties' share of the vote.
Without a clear winner, this is making the act of governance all the more difficult which, in turn, is hampering reform efforts.
In addition, the uncertainty that's been thrown up will likely knock the Italian economy further into reverse.
The result has been a mass sell off in equities, particularly Italian and other banking stocks, the euro and pretty much any other risk asset you can think of.
In fact, an inflammation of the Eurozone debt crisis is seen as just as much of a risk for the US economy as it is for the Eurozone.
Accordingly, the Italian election concerns caused the Dow Jones to post a sharp decline last night, with the index losing 216 points to 13,784.
This morning, European stock markets are following suit, with the FTSE seeing triple digit losses, taking it to 6255, and the DAX
tumbling by 150 points.
Those clients who held onto their short positions will be delighted to see this move lower, but the jury is still out as to whether this presents a buying opportunity or whether we'll see another leg down.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Angus Campbell, 26 February 2013