Italy turns European markets red

Ben Southwood
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EUROPEAN markets went into free-fall yesterday, as Italian electoral gridlock obliterated all the gains the continents’ indices have made so far in the year.

Nearly every European index was down, as the Italian upper chamber was split between Silvio Berlusconi’s centre-right, Pier Luigi Bersani’s centre-left and Beppe Grillo’s populist protest party.

Euro Stoxx 50 plunged 3.1 per cent in the day, while the broader Stoxx Europe 600 was down 1.3 per cent. The FTSEurofirst 300 index slid 1.4 per cent, the MSCI Euro index dived 2.7 per cent and the Euronext 100 index slumped 2.1 per cent.

On top of yesterday’s falls Italian 10-year bond yields gained some 41 basis points, to reach 4.9 per cent – reaching a spread of 345 basis points over equivalent German offerings. And more expensive Italian debt dragged up Spanish yields to 5.37 per cent, up 20 basis points, and now only inches away from a 400 basis point spread over German debt.