Italy's FTSE MIB is down by 1.7% on the day


The sharp move lower sees Italian stocks lag behind its peers due to rising risks of an election taking place as the leading parties in the coalition government continue to be at odds with one another. Of note, banking stocks are down by 2.5% as 10-year BTP yields surge higher by 7 bps to 1.62% currently.

I reckon it's still too early to read into the election hustle and bustle as Salvini has reiterated that there is time - until after the summer - before calling an election, if necessary.

Hence, today may just be a bit of a one-off as investors seek some profit taking before the ECB next week but it's also a sign that should election jitters start to intensify, Italian assets in general may encounter a bit of rocky road over the next few months.

As for European assets (and the euro) in general, just be wary of potential spillover effects if we ever do come to that point.