European stocks singed as risk returns to front burner

LONDON: European stocks slid on Tuesday as political risk once again returned to the fore with Italy nearing a deal for early elections and a fresh game of chicken over Greece's bailout keeping investors on edge.

"Investors have returned after a long weekend to fresh economic concerns for the eurozone -- centred on problem countries Greece and Italy," said research analyst Henry Croft at Accendo Markets.

Italy's political parties are edging towards a deal that would pave the way for elections in the autumn under a new proportional system. With opinion polls suggesting no stable majority is likely to emerge, investors in Italy took fright, sending the Milan stock exchange two percent lower on Monday. It held steady on Tuesday.

"Talk that Italy will spice up Europe's political landscape again with its own snap election is unsettling the idea that Europe is now free of populist risk in 2017," said market analyst Jasper Lawler at London Capital Group.

Meanwhile another impasse between Greece and its creditors over its bailout conditions has raised concerns among investors again.

France's CAC 40 shed 0.6 percent in afternoon trading while the DAX 30 in Frankfurt gave up 0.1 percent.

Meanwhile in London the FTSE 100 was off 0.3 percent as next week's general election approaches.

Britain's Prime Minister Theresa May's lead over Labour leader Jeremy Corbyn has been sliding ahead of the June 8 vote.

Stocks opened lower on Wall Street after a three-day weekend.

"US stocks are modestly lower in early action, returning to action following yesterday's holiday break, with political uncertainty on both sides of the Atlantic appearing to hamper conviction," said analysts at Charles Schwab brokerage.

President Donald Trump's administration has been rattled by an ever-widening investigation into Russian election meddling.

In Asia, most stock markets drifted lower in holiday-thinned trade on Tuesday, with Hong Kong and Shanghai shut.

- BA shares descend -

British Airways owner IAG saw its share price slide 2.5 percent after a chronic IT crisis sparked thousands of flight cancellations over the busy holiday weekend.

Some 75,000 passengers were affected by the computer system outage that caused chaotic scenes at London Gatwick and Heathrow, Europe's busiest airport.

"IAG is in the doldrums after a long weekend of chaos at British Airways," noted ETX Capital analyst Neil Wilson.

"BA faces all kinds of questions in the wake of its IT failure and investors are rightly turning a bit cautious.

"It is estimated that the cost of the fiasco might be around 100 million euros, or around five percent of pre-tax profits this year. Far worse is the reputational damage to the brand."