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Italian stocks suffer over election gridlock

With the expectation of the FTSE MIB, European equity markets are in positive territory this morning.

The Italian elections over the weekend have shaken investor confidence in the country, as it appears Italy is heading for a hung parliament.

The votes are still being counted, but the early indication is there will be no majority. Added uncertainty comes from the rise of the anti-establishment Five-Star Movement. Traders fear the nation could be plunged into a period of political unpredictability, and this could delay much-needed reforms.  

Interserve shares are in demand today, after it was reported that Emerald Investment Partners could be looking to build a stake in the company. The investment firm has been snapping up Interserve’s debt in the secondary market, and it is alleged it owns approximately one third of its loans. Emerald Investment

Partners has agreed to support Interserve’s refinancing, which will be a major boost to the troubled support services firm. The share price has been in decline since 2014, but a move above the 125p region could signal an end to the downtrend.

Shares in Ultra Electronics are down 12% after the company pulled its bid to acquire Sparton Corp in the US for $234 million. The takeover attempt raised concerns from the US Department of Justice. It was a mutual decision by Ultra Electronics and Sparton to terminate the attempted buyout. In the same update, Ultra Electronics stated its underlying profit fell by 9.25%, with fewer defence orders in the UK cited as the reason behind the decline in earnings.

GBP/USD nudged higher after the UK revealed services figures that topped estimates. In February, the services PMI reading jumped to 54.5 – a four-month high, while economists were expecting a reading of 53.3.

EUR/USD has been weakened by the outcome of the Italian election, and the largely underwhelming services reports from Italy, France and Germany. The services industry in the eurozone has slowed, growing at a weaker rate than expected. It is possible the relative strength of the euro is curtailing growth in the region.

At 3pm (UK time) the US services PMI report is released, and the consensus is for a reading of 59, down from 59.9 in January.

We are expecting the Dow Jones to open down 10 points at 24,528 and we are calling the S&P 500 down 2 points at 2,689.

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