Italian politics causes further confusion

Italian prime minister Enrico Letta spent the morning embroiled in negotiations, in an attempt to bring growing fears over his coalition's reign under control.

The Italian MIB index has been particularly volatile, with the changing stance of Silvio Berlusconi and his party causing most of the uncertainty. However, ahead of the US open Mr Letta convincingly won a vote of confidence.

Ahead of a bank holiday in Germany tomorrow, the European Central Bank announced that it would keep eurozone interest rates on hold, as expected.

The political picture in the US is just as unclear, but across the Atlantic it does not appear that we will see a quick resolution to the budget impasse between the Democrats and Republicans. The inconvenience as a result of the government’s forced shutdown is one thing, but the longer it takes for the two parties to reach an agreement, the more worried markets will be over the upcoming debt ceiling issue.

The arguments between the parties seem relatively minor and so it’s difficult to believe that US politicians are looking at the bigger picture.

The major US indices got off to a soft start this afternoon, with the current problems likely to put a lid on any upside momentum that equity traders manage to muster.

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