ITALIAN bank stocks dropped sharply yesterday after renewed worries about the government’s ability to pay its debts pushed up state borrowing costs.
Greece’s economic nightmare continued as official data showed unemployment increased to a record high of 21.8 per cent in January, and youth unemployment hit 50.8 per cent.
Meanwhile UBS analysts warned that the crisis is one of solvency and so cannot be solved alone by the liquidity pumped into the system by the European Central Bank.
The Italian government raised €2.88bn in three-year bonds at a yield of 3.89 per cent – sharply up on the 2.76 per cent at a similar auction last month.
Shares in UniCredit dropped 3.4 per cent after the auction, but picked up later as markets around the world jumped on hopes that the Fed may boost its quantitative easing program.
New York Fed boss William Dudley said the economy is not yet “out of the woods,” hinting that the central bank could step in with more support if necessary.
The Dow Jones rose 1.41 per cent, FTSE100 jumped 1.34 per cent and German DAX rose 1.03 per cent by the end of the day.