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 were up 0.1 percent in low volumes.
Europe's Stoxx 600 fell 0.7 percent and London'sFTSE 100 fell 0.9 percent dragged lower by weaker financials and homebuilders' shares.
Earlier in the day, the Australian dollar recovered from awobbly start caused by political uncertainty post-election whileAsian shares and base metal prices rose, partly on expectationsof economic stimulus from China. JPMorgan strategists warned investors against chasing therally in risky assets. "We do not believe that we will see a sustained upmove.Positioning is not washed out, market internals are not positiveand political uncertainty will linger," they wrote in a note. Caution is likely to persist through the week with the Bankof England scheduled to publish its quarterly financialstability report on Tuesday, the June U.S. Federal Reservemeeting minutes due on Wednesday and U.S. jobs data on Friday. In bond markets, worries about the health of Italian banksand some 20 billion euros ($22.2 billion) of bond supply in theregion this week combined to halt a post-Brexit tumble inregional borrowing costs. Italian banking index fell more than 3.5 percenton Monday, while the European Central Bank asked Italy's BancaMonte dei Paschi di Siena to slash its bad debts by 40percent over three years, heaping more pressure on Rome andBrussels to stabilise the Italian banking system. Italy is in talks with the European Commission on devising aplan to recapitalise Italian lenders with public money limitinglosses for bank investors, an EU spokeswoman said on Sunday. UK POLITICS 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 bluechips. This continued on Monday with the FTSE midcaps index off more than 2 percent.
Sterling came under pressure following poor data that showed Britain's construction sector PMI survey suffered its worst contraction in seven years in the run up to the vote to leave the European Union.
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The currency recovered some ground in late trading, rising 0.1 percent to $1.3284, still nursing its losses after an 11-percent plunge to a 31-year trough of $1.3122 a week ago following last month's shock Brexit vote.The weekend's headlines were dominated by mixed messagesfrom the candidates seeking to replace David Cameron asConservative Party leader and prime minister, offering marketslittle certainty about the outlook for the months ahead.
The euro was little changed at $1.1140 and was down slightly against its Japanese counterpart at 114.27 yen. Crude oil prices extended gains from Friday's surge aftercomments by the Saudi energy minister that the oil market isheading towards balance despite signs of slowing demand in Asia. Spot gold added 0.7 percent to $1,352.10 an ounceafter gaining 1.5 percent on Friday and about 9 percent in June. Silver spiked 3 percent higher to $20.30 an ounce,breaking the $20-dollar level for the first time in nearly twoyears.($1 = 0.8991 euros)
(Reporting by Vikram Subhedar; Editing by Toby Chopra)
