Italy's Luigi Di Maio Resigns As Five Star Leader

With his once-vanquished partner-turned-rival Matteo Salvini breathing down his neck, Luigi Di Maio, the longtime leader of Italy's anti-establishment, left-of-center Five Star Movement, has stepped down from his position at the head of the party, though he will continue to serve as Italy's foreign minister in a coalition government with the centrist Democrats.

Di Maio

News of Di Maio's departure is a harbinger of more political turbulence in a country where the ruling coalition is held together by an extremely fragile alliance, and as a result Italian assets - including stocks and government bonds - sold off initially but have since managed to recover losses.

An index of Italian banking stocks slumped nearly 2% to its lowest level in six weeks. Italy's still-struggling financial sector is particularly sensitive to signs of political instability.

Over the past year, Five Star's popularity has been shrinking as its chief rival, Salvini's right-wing League, snatched the crown of most popular party in the country away from M5S.

Di Maio said he will deliver a press conference later this afternoon (at 5 pm in Rome, or 11 am in New York).

Citing reports in Italian newspapers, the FT reports that Di Maio is expected to quit following a wave of defections of MPs who are apparently frustrated with his leadership. Support for the party has declined over the past year, and a resurgent League looks poised to win a critical election this weekend in the region of Emilia-Romagna, the birthplace of Italian socialism.