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Europe close: Italian and Spanish stocks heavily sold
Italian stocks and government bonds slumped with shares of the country's banks bearing the brunt of selling after Italy's main anti-establishment parties, the Five Star and League, threw down the gauntlet to Brussels on austerity and against the bloc's fiscal rules.
The policy proposals of the two aspiring parties to lead a coalition government included a 780 (£678) monthly 'citizens' income' for the unemployed, lower personal tax rates, a review of the EU's fiscal rules and rolling back the recent pensions reform.
News of the agreement, which must still be approved by the country's president, Sergio Mattarella, likely on Monday, sent longer-term Italian government bond yields down again and weighed further on the country's benchmark equity index.
"What will be certain on Monday is that, in the event of a failure to form a government (the two had yet to nominate a candidate for Prime Minister), the window of opportunity to hold an election at the end of July will probably be virtually closed," said analysts at UniCredit
Against that backdrop, by the closing bell, Milan's FTSE Mibtel had slid 1.48% or 352.34 points to trade at 23,449.65, alongside a 0.28% or 36.89 point dip on the German Dax to 13,077.72, while the Cac-40 was 0.13% or 7.41 points lower to 5,614.51.
The pan-European benchmkark Stoxx 600 meanwhile was off by 0.28% or 394.67 points to 394.67, alongside a fall of 1.02% or 104.0 points to 10,112.40 for the Spanish Ibex 35.
Meanwhile, the yield on the benchmark 10-year Italian government bond was 11 basis points higher at 2.23%, their session high and their loftiest level since October.
That pushed the risk premium versus similarly-dated German bunds to 165 basis points, with some analysts, albeit not all, seeing scope for even further gains.
The news out of Rome also weighed on Spanish bonds, with the 10-year government note yield up by four basis points to 1.44, with bunds the main beneficiary as investors sought out safe havens, pushing their yield down by six basis points to 0.58%.
In the background, traders were scanning the headlines coming out of the ongoing trade talks between China and the US, in Washington.
The most important of those was a denial by Chinese officials that the Asian giant had offered to slash its country's trade deficit by $200bn via increased imports of American goods.
Both Accendo Markets's Mike van Dulken and IG's Joshua Mahony pointed to doubts about the success of those talks as another key factor that was dampening on investor sentiment on Friday.
Elsewhere on the economic front, Eurostat reported a rise in the euro area's seasonally adjusted trade surplus from 20.9bn for February to 21.2bn in March.
That came alongside a Eurozone current account surplus of 32.0bn for March.
Shares of Swedish retailer Hennes & Mauritz were in the spotlight on Thursday, but trade lower, despite continued reports of share purchases by its chairman Stefan Persson, which at the last count were running at roughly £543m for the year-to-date.
Fiat was also in the headlines after Bloomberg reported on company chief Sergio Marchionne's plans to unveil a strategic shift by the carmaker towards upscale models. Shares of the company fell however.
To the north, in France, Airbus was little changed despite a Reuters reports of a potential massive order by Dubai Aerospace for Airbus and Boeing jets.