Source: Sharecast
At 0850 BST, the FTSE 100 was down 0.9% to 7,664.66, with sentiment wobbly ahead of likely fresh elections in Italy and as Spanish premier Mariano Rajoy faces a vote of confidence in his leadership at the end of week.
In currency markets, sterling was flat against the euro at 1.1453 and down 0.2% versus the dollar at 1.3282. The euro, meanwhile, was trading at a six-and-a-half month low against the greenback, down 0.4% at 1.1576.
Fresh elections are now expected in Italy after President Sergio Matarella intervened on Sunday to block the populist coalition partners from installing a euro-sceptic as their choice for finance minister - news that sent Italy’s two-year yield back toward euro crisis highs, adding 50 basis points on Monday to 0.981%.
Analysts at Rabobank pointed out that both September and October have been suggested by Italian press as possible months for the fresh ballot.
"Expectations that a potentially more market friendly administration is likely to have very little time in the seat, the mere prospect of a second poll this year on account of political deadlock and Presidential intervention raises questions as regards just how those vying for power are likely to fare and indeed, just how much populist juice they will be able to extract from the latest chapter in Italian politics.
"Leaders from both the League and Five Star have already seized on Matarella’s move as un-democratic, part of the old Italy and representative of an elite class that they have vowed to sweep aside. While Matarella may have bought some time, his move could yet backfire, serving merely to embolden even greater support for both parties that may see market concerns of Italy’s drift from the euro area intensify."
Meanwhile, in Spain, the opposition party called for a vote last week after a Spanish court handed down a ruling on a corruption case involving members of the ruling Partido Popular.
"The confidence vote and the political turmoil that this could create in Spain adds fuel to the political fire burning in Italy at present, the prospect of which in combination with concerns as regards the stability of Spanish politics will continue to apply pressure to peripheral debt markets and likely support the ongoing bid for core govvies already in motion," Rabobank said.
In UK corporate news, Dixons Carphone shares tumbled after the company said profits were down 24% in the past year and will drop more than 21% in the coming year as new chief executive Alex Baldock sees "plenty of hard work" ahead for the electricals retailer.
Vedanta was in the red as it was ordered to permanently close its Tuticorin copper smelter in India, where anti-expansion protestors were killed by police earlier in May.
GlaxoSmithKline slipped after it and Innoviva submitted a regulatory application to the Japanese Ministry of Health, Labour and Welfare for their single inhaler triple therapy for the treatment of patients with chronic obstructive pulmonary disease or COPD.
Old Mutual was in the red after saying it will proceed with the listing of its asset management business Quilter PLC following shareholder approval for the managed separation.
Standard Life fell as it said it plans to return £1.75bn to its shareholders following the sale of its UK and European insurance business to Phoenix Group.
Rolls-Royce retreated as it unveiled a new range of engines for aviation business, purpose built for Bombardier’s latest jets, while RBS was weaker following reports that the government could sell off another stake in the bank this week.
On the upside, Smiths Group rallied after it confirmed that it is in very early stage discussions about a potential combination of its medical division with Nasdaq-listed ICU Medial.
Serviced office provider IWG was also on the front foot as Prime Opportunities Investment said it had made a cash offer for the company that was rejected. The US real estate investment group said it is considering making another offer for the group.
In broker note action, IAG was upgraded to ‘buy’ at AlphaValue, while Fresnillo was lifted to ‘outperform’ at BMO.
Ocado was cut to ‘equal-weight’ at Morgan Stanley and Workspace was downgraded to ‘hold’ at Deutsche Bank.
Market Movers
FTSE 100 (UKX) 7,664.66 -0.85%
FTSE 250 (MCX) 20,870.82 -1.14%
techMARK (TASX) 3,526.03 -0.92%
FTSE 100 - Risers
Smiths Group (SMIN) 1,780.00p 3.49%
Fresnillo (FRES) 1,332.00p 2.66%
Smurfit Kappa Group (SKG) 3,142.00p 1.09%
Land Securities Group (LAND) 954.30p 0.24%
Scottish Mortgage Inv Trust (SMT) 513.80p 0.16%
SEGRO (SGRO) 650.60p 0.09%
Sky (SKY) 1,346.39p 0.03%
Randgold Resources Ltd. (RRS) 5,758.00p -0.00%
Anglo American (AAL) 1,779.00p -0.01%
Diageo (DGE) 2,760.00p -0.09%
FTSE 100 - Fallers
CRH (CRH) 2,669.00p -2.48%
Royal Bank of Scotland Group (RBS) 282.60p -2.45%
Ashtead Group (AHT) 2,284.00p -2.14%
Sage Group (SGE) 666.20p -2.12%
Barclays (BARC) 201.85p -2.11%
Rolls-Royce Holdings (RR.) 826.80p -1.97%
NMC Health (NMC) 3,742.00p -1.84%
Marks & Spencer Group (MKS) 305.00p -1.83%
G4S (GFS) 276.00p -1.81%
Mediclinic International (MDC) 622.00p -1.77%
FTSE 250 - Risers
Pershing Square Holdings Ltd NPV (PSH) 1,046.00p 2.35%
IWG (IWG) 309.80p 1.81%
Charter Court Financial Services Group (CCFS) 318.95p 1.24%
Renewi (RWI) 78.94p 1.21%
Millennium & Copthorne Hotels (MLC) 552.00p 0.91%
F&C Commercial Property Trust Ltd. (FCPT) 146.40p 0.69%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 110.73p 0.66%
Alfa Financial Software Holdings (ALFA) 330.50p 0.61%
Murray International Trust (MYI) 1,161.00p 0.61%
UK Commercial Property Trust (UKCM) 87.94p 0.50%
FTSE 250 - Fallers
Bank of Georgia Group (BGEO) 2,014.00p -35.30%
Dixons Carphone (DC.) 194.05p -16.86%
TalkTalk Telecom Group (TALK) 112.90p -5.44%
Capita (CPI) 139.85p -4.80%
Vedanta Resources (VED) 694.68p -4.60%
Ocado Group (OCDO) 855.40p -3.52%
Investec (INVP) 574.60p -3.40%
Stobart Group Ltd. (STOB) 242.70p -3.31%
Sophos Group (SOPH) 564.50p -3.17%
RPC Group (RPC) 770.20p -3.14%
