By Vikram Subhedar
LONDON (Reuters) – The post-Brexit recovery across European markets sputtered to a halt on Monday with major equity indices lower and safe-haven demand for precious metals helping the price of silver surge to near a two-year high.
Financial and commodities markets in the United States were closed for the July 4 public holiday. U.S. stock futures
Europe’s Stoxx 600 <.STOXX> fell 0.7 percent and London’sFTSE 100 <.FTSE> fell 0.9 percent dragged lower by weaker financials and homebuilders’ shares.
Earlier in the day, the Australian dollar recovered from wobbly start caused by political uncertainty post-election while Asian shares and base metal prices rose, partly on expectations economic stimulus from China.
JPMorgan strategists warned investors against chasing the rally in risky assets.
“We do not believe that we will see a sustained upmove.Positioning is not washed out, market internals are not positive and political uncertainty will linger,” they wrote in a note.
Caution is likely to persist through the week with the Bank England scheduled to publish its quarterly financial stability report on Tuesday, the June U.S. Federal Reserve meeting minutes due on Wednesday and U.S. jobs data on Friday.
In bond markets, worries about the health of Italian banks and some 20 billion euros ($22.2 billion) of bond supply in the region this week combined to halt a post-Brexit tumble inregional borrowing costs.
Italian banking index <.FTIT8300> fell more than 3.5 percenton Monday, while the European Central Bank asked Italy’s BancaMonte dei Paschi di Siena
Italy is in talks with the European Commission on devising aplan to recapitalizes Italian lenders with public money limiting losses for bank investors, an EU spokeswoman said on Sunday.
Fears of an economic slowdown in the Britain have taken a toll on shares of smaller domestically focused companies, which have significantly underperformed export-oriented blue chips. This continued on Monday with the FTSE mid caps index <.FTC> off more than 2 percent.
Sterling came under pressure following poor data that showed Britain’s construction sector PM survey suffered its worst contraction in seven years in the run up to the vote to leave the European Union.
The currency recovered some ground in late trading, rising 0.1 percent to $1.3284
The euro was little changed at $1.1140
(Reporting by Vikram Subhedar; Editing by Toby Chopra)