What's going on?

Stocks and bonds fell on Tuesday as Italy hit yet another speed bump on the way to forming a government. Investors moved their money out of Europe and into the safer havens of US government bonds.

What does this mean?

Last week, investors were shaken by Italy�s potential borrowing and spending plans, selling off the country�s bonds. Ongoing political turbulence in the country has seen investors continuing to sell � Italian stocks fell by more than 2%, while stocks in Europe and the US dropped by around 1% on Tuesday.


Investors� current sanctuaries of choice appear to be US and UK government bonds: rising demand has pushed the prices of these assets higher. They�re often perceived as �risk-free� because both countries can print more money if needed to meet interest and debt repayments (and neither has ever missed a payment � a.k.a. defaulted).

Why should I care?

The bigger picture: The US economy still looks pretty good.

While the big investment boom investors were hoping for in the US hasn�t happened yet, companies� spending on equipment and machinery has slowly started to pick up in April after falling in March. This should be good for the economy, which grew more than 2% in the first quarter and is expected to expand by closer to 3% for 2018 overall. But if business spending shoots too high, it could cause a jump in inflation � meaning the Federal Reserve will likely increase interest rates at a faster pace than expected to stop prices from rising too quickly.

For markets: UK stocks haven�t had a good day either.

UK stocks fell by 1% on Tuesday with major electricals retailer Dixons Carphone leading the decline � its shares fell by 20%. In a statement, the company acknowledged its lack of investment in its staff and customers. It also said profits next year would be more than 20% lower than this year�s, partly because people aren�t getting new mobile phones as often � and that store closures were afoot.