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European stock markets are expected to be hit by political i..

European stock markets are expected to be hit by political instability in Italy today, after attempts by the two main populist parties to form a government collapsed over the weekend, triggering the prospect of fresh elections.

Today's top story: Italian President appoints caretaker technocrat after coalition of populists collapses

Today's leader: Italy's populists will take advantage of this chaos for all it is worth

Spain, another major Eurozone economy, is also looking politically weak with its Prime Minister Mariano Rajoy facing a vote of no confidence on Friday.

The euro fell to $1.1629 from Monday's $1.1608, its lowest since early November.

Analysts from the London Capital Group research team called the FTSE to open 35 points lower at 7,695, Germany's Dax was forecast to open 24 points lower at 12,839 and France's Cac was called to open 10 points lower at 5,498.

Asian shares fell today on the back of European instability, although the prospects of US peace talks with North Korea and a fall in oil prices helped soften the blow.

MSCIs index of Asia-Pacific shares outside Japan fell by half a per cent after three consecutive sessions of gains.

Japan's Nikkei fell more than one per cent, South Korean shares slipped 0.8 per cent and Chinese shares were down 0.6 percent.

“The market has turned its focus to the continuing political situation in Italy,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

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