Euro, equities fall on Italy debt concern

Mon Nov 7, 2011 7:10am EST
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By Emelia Sithole-Matarise

LONDON (Reuters) - The euro and world stocks fell on Monday as political uncertainty in Italy fueled concern the euro zone debt crisis could engulf the bloc's third biggest economy, prompting investors to cut exposure to riskier assets.

Investor focus shifted to Italy, where Prime Minister Berlusconi is facing rebellion from his party, overshadowing a government coalition deal in Greece to help secure its latest bailout package and avoid a near-term default.

Although equities trimmed losses on market talk that Berlusconi could resign soon, investors were on edge before a key parliamentary vote on budget reforms on Tuesday that is turning into a test of his leadership.

"The focus is Italy; Italy's clearly the big one. Everyone expected what has come out of Greece," Christopher Potts, strategist at Cheuvreux, said.

"The whole problem is the (Italian) opposition and its disarray. Who takes over and how will it be organized? No-one has the answer but it's of huge importance," he added.

U.S. shares were poised to open lower, with futures for the S&P 500 0.5 percent down, and those for the Nasdaq slipping 0.4 percent.

The FTSEurofirst .FTEU3 was last 0.4 percent down after a 3.8 percent decline last week which ended a five-week rally. The MSCI world equity index .MIWD00000PUS was last 0.2 percent lower as emerging stocks .MSCIEF slipped 0.4 percent.


<p>Passersby look at an electronic board displaying a rise in major market indices around the world, outside a brokerage in Tokyo October 27, 2011. REUTERS/Issei Kato</p>