European equities slid yesterday as investors tracked a brewing political fight between Brussels and Rome, and continued to digest the outcome of the region’s parliamentary elections, dealers said.

Milan’s stock market was the worst performer in Europe, sinking by 1.2 per cent as Italian debt concerns returned to the fore.

“Italy is once again becoming a problem for the eurozone,” noted analyst Konstantinos Anthis at trading firm ADSS.

However, losses were capped elsewhere after a much-feared surge in populist groups largely failed to materialise in European Parliament elections. Although voters shifted allegiances in the EU elections, mainstream parties managed to retain control.

London stocks dipped 0.2 per cent following a long holiday weekend, while Frankfurt shed 0.5 per cent and Paris was down 0.6 per cent.

“European stock markets are in the red as Italian government bond yields have ticked up over a fear for a political fight between Rome and Brussels,” said analyst David Madden at CMC Markets UK.

“The EU has warned the Italian government they could be fined... for failing to curb their debt levels, and Italy’s joint deputy prime minister Matteo Salvini declared he will use ‘all his energies’ to fight the EU’s rules.”

Mr Salvini said yesterday he expected Brussels to slap Rome with a three billion-euro fine over the country’s rising debt and structural deficit levels.

“At a time when youth unemployment touches 50 per cent in some regions... someone in Brussels is demanding, under the old rules, a fine of three billion euros,” he told RTL 102.5 radio.

“All my energy will go into changing these rules from the past,” said Mr Salvini, who has been emboldened after his far-right League party won Sunday’s European Parliament elections in Italy.

The European Commission is expected to start disciplinary steps against Italy on June 5 by opening an excessive deficit procedure which could hand Italy a fine of up to 0.2 per cent of the nation’s GDP.

Italy’s public debt is a big problem, sitting at 132.2 per cent of the country’s GDP in 2018 – way above the 60 per cent EU ceiling.

In Britain, the pound continued to languish near recent lows after the anti-EU Brexit party topped European polls in Britain, putting intense pressure on the ruling Conservatives who suffered a historic rout –  and raising the chances of a no-deal departure from the EU at the end of October.

British Prime Minister Theresa May’s Conservatives finished fifth with nine per cent – their worst performance since 1832 – and the main opposition Labour Party was also punished for not clearly spelling out its Brexit stance.

David Cheetham, analyst at broker XTB, said the outcome was “providing a headwind to any recovery for the pound.

Elsewhere, oil prices rose after last week’s heavy plunge that followed a surprise increase in US crude and gasoline inventories. 

Rising stockpiles tend to indicate weaker demand for black gold.

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