Political uncertainty in Spain and Italy spooks markets.

Spanish PM Mariano Rajoy is having to fight off allegations that he and other leaders in his party took bribes, while in Italy, Silvio Berlusconi's party is surging in the polls ahead of upcoming elections as he promises to tear up "German-imposed" austerity policies and cancel a despised property tax. The uncertainty has been causing ructions in markets, and at midday in Europe, Madrid shares were -1.6% and Milan was -2.1%, while Spanish 10-year bonds were +15 bps at 5.21% and those of Italy were +7 bps at 4.4%.