The DAX index has recorded sharp losses Monday session. Currently, the DAX is trading at 11,364, down 1.41% on the day. In economic news, there are no German or eurozone events. On Tuesday, Germany releases ZEW Economic Sentiment, with the markets braced for a poor reading of -24.2 points.
European stock markets continue to show volatility, as investors keep a nervous eye on two simmering issues. One is Brexit, where Prime Minister May is facing stiff opposition over her Brexit proposals. British and European negotiators met on the weekend but were unable to resolve the Irish border issue. The EU wants a backstop solution to be under the jurisdiction of the European Court of Justice, but the UK is unlikely to agree to such a proposal.
The standoff between Italy and the EU over Italy’s budget could escalate this week. The EU Commission has demanded that Italy revise its budget by Tuesday, which it argues raises Italy’s debt and is in breach of EU fiscal rules. If Italy refuses to comply, the EU could impose financial sanctions on Rome. For its part, the Italian government says that the economic slowdown requires an expansionary budget. Italy has suggested that it will lower its GDP forecast, in order to meet the EU requirements. Italy is the third largest economy in the eurozone, and the financial markets and the euro could react negatively if Rome and Brussels cannot resolve the crisis.
