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Italy and Spain send shockwaves through Europe

Stock markets in Europe are being hammered today as political uncertainty in Italy and Spain has soured sentiment. 

Italy has named Carlo Cotarelli as the caretaker prime minister, but traders are nervous about the next general election, which could be as early as August.

Anti-euro sentiment is growing in Italy, and this has shaken investor confidence. Spain is also going through its own political crisis as prime minister Mariano Rajoy is facing a ‘no confidence’ vote on Friday. The prospect of a snap election in Spain is adding to the fearful mood in Europe today.

Shares in Dixons Carphone have slumped today after the company issued a profit warning. The firm announced that profit would fall by 21% to £382 million, and it predicted the following year’s profit would be ‘around £300 million’. Weak mobile phone sales and thin margins were blamed for the poor performance. CEO Alex Baldock joined the company in March, and has been quick to start a management clearout. Mr Baldock will continue with his restructuring plans, and believes the problems are ‘fixable’. This is a classic case of a new CEO quickly putting his stamp on the business, and getting the drastic overhaul done quickly. The stock is down 21% at 183p, and if it breaks below 170p it could target 150p. 

Smiths Group confirmed it is in talks with ICU Medical about potentially merging its healthcare division. ICU Medical has a market capitalisation of £4.2 billion and the healthcare unit of Smiths Group is worth approximately £2 billion, so the proposed new company would be worth in excess of £6 billion. There are no guarantees the move will go ahead, but the news has sent shares in Smiths Group to a record high.

EUR/USD is in the red today as the greenback extends its rally, and Italian consumer sentiment slips. The latest consumer confidence reading fell to 113.7 from 117.1, while economists were expecting 116.5.

At 3pm (UK time) the US will release the latest Conference Board consumer sentiment survey, and the consensus estimate is for 128, which would be a slight decline on the April reading of 128.7.

We are expecting the Dow Jones to open down 198 points at 24,555 and we are calling the S&P 500 down 22 points at 2,699.

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