The iShares MSCI Italy (NYSEArca: EWI) was down more than 2% in U.S. morning trade after Prime Minister Mario Monti said he plans to step down early.
Italy’s stock market sold off on Monti’s resignation and news that former prime minister Silvio Berlusconi has decided to seek office again. Berlusconi’s party withdrew its support for Monti’s government.
“Monti is the one who managed to stabilize Italy and stop the contagion from Greece,” said David Thebault, a trader at Global Equities, in a BBC News report. “His surprise resignation brings back the political risk in the equation, something we had forgotten about.”
“You can expect a sharpening in anti-austerity, anti-reform rhetoric…and this will probably translate into a higher risk premium on Italian assets,” said Goldman Sachs analysts in a Reuters article.