Spanish and Italian politics shook the euro zone stock markets as peripheral banks fell

MILAN / LONDON (Reuters) – Euro zone stocks rose on Friday as the increased risk of an early election in Spain created a new political anxiety among investors who were already shaken by the plans of the new Italian government to increase fiscal spending.

PHOTO OF THE FILE: The merchants prepare before the opening of the German stock exchange in front of the empty meeting of the DAX, in the exchange of Frankfurt, Germany, on June 24, 2016. REUTERS / Staff / Remote / File Photo

Spanish and Italian stocks fell sharply, with peripheral banks firmly in the line of fire, while German stocks and Bunds -considered a safe haven- made a profit as investors withdrew money from debt and equity stocks. the peripheral euro zone.

Spain took the attention of Italy due to pressure exerted on Prime Minister Mariano Rajoy, with opposition parties calling for a vote of distrust and an early election on a case of corruption involving members of his party.

This, combined with concerns about Italy's new Eurosceptic government, difficult world trade talks and the slowdown in the economy, helped push Europe's STOXX 600 to its first weekly loss in two months.

The main index of shares of Spain .IBEX lost up to 2.4 percent in a volatile day, closing the session with a decline of 1.7 percent, with the banks at the head of the losses. The shares of Caixabank ( CABK.MC ), Santander ( SAN.MC ) and BBVA ( BBVA.MC ) fell between 2.9 and 3.8 percent .

Italian and Spanish banks saw the most intense trading at a time, with more than three times the average daily volume traded at Banco BPM ( BAMI.MI ) and Caixabank, while Unicredit, Intesa Sanpaolo , Santander and Sabadell ( SABE.MC ) shares the hands transacted at more than twice its daily intensity.

The index of banking shares in the euro area .SX7E fell 1.9 percent. It was his second consecutive week of losses, taking him to a minimum of 13 months.

Spanish electricity and gas companies, sensitive to changes in government policy, also fell. Gas Natural ( GAS.MC ), Endesa ( ELE.MC ), Acciona ( ANA.MC ) and Red Eléctrica ( REE.MC ) were among the main losers, with a decrease from 2.7 to 3.3 percent.

Barclays badysts said they saw the upcoming Spanish elections as more and more likely, but added: "Currently it is not very clear what the exact path will be for the next elections."

FTSE MIB .FTMIB of Italy sank in seven new lows of the week, up to 1.5 percent.

Italian equity funds posted record bailouts of $ 380 million last week with concerns over the political situation in the eurozone's third largest economy that also triggered capital outflows and European bond funds, the figures showed. of EPFR.

Italian banks .FTIT8300, seen as an indicator of political risk in Italy due to its large holdings of sovereign bonds, ended the day with a decline of 3.7 percent at a minimum of 11 months, with the main lenders Intesa Sanpaolo ( ISP.MI ) and UniCredit ( CRDI.MI ) fell 3.2 and 3.9 percent.

"The new coalition government proposes measures that our economists see as likely to widen the budget deficit and lead Italy's national debt to rise again," Goldman Sachs badysts said. They estimated that the measures of the new government would have an impact of 60 basic points in the capital mattresses of the banks.

The Italian medium-sized lenders Banco BPM, Finecobank and Mediobanca were among the worst in Europe, with a decrease of 4.1 to 7.3 percent.

Autos .SXAP rose 0.3 percent after US President Donald Trump's threat to impose import tariffs generated strong criticism, with US business groups and members of his own party warning of damage to US industry and interests.

Oil and gas stocks .SXEP fell 1.9 percent due to falling oil prices.

The main loser in the STOXX was Centamin ( CEY.L ), which plummeted 18.3 percent after the mining group drastically reduced its year-round production guidance and raised its cost expectations due to the low mineral grade in a mine in Egypt.

The biggest winners in the STOXX were Pennon Group ( PNN.L ), an increase of 6.5 percent after its operations update, and SimCorp ( SIM.CO ), an increase of 7.8 percent after a target price update.

To see a graph of Spain, Italy, Europe's stocks falling, click:

Information by Danilo Masoni and Helen Reid,; Edition of Louise Ireland and Gareth Jones


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