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Italian Stock Market Suffers as Italy-EU Debt Row Worsens, Bonds Stabilize

Italian Stock Market Suffers as Italy-EU Debt Row Worsens, Bonds Stabilize

2019-05-29 14:00:00
Martin Essex, MSTA, Analyst
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Italian debt, stocks and bonds, news and analysis:

  • Italian stocks are falling hard as the European Commission presses Italy on its public-sector debt.
  • The Italy/Germany government bond yield spread, however, looks to be stabilizing.

Italy and EU in conflict over debt

A growing confrontation between Italy and the European Commission over Italy’s debt burden is hitting its stock market hard, although the country’s Government bonds, or BTPs, are weathering the storm.

According to the Reuters news agency, the Commission wrote to the Italian government Wednesday, asking it to explain a deterioration in the countrys public finances in a move that could pave the way for Brussels to begin disciplinary action against Rome next week. That follows a strong performance in last week’s European Parliament elections by the League party, led by Deputy Prime Minister Matteo Salvini.

He said Wednesday that the Government will never increase taxation, deepening the rift between Italy and the EU that has already hit the main Italian stock market index, the FTSE MIB, hard.

FTSE MIB Price Chart, Four-Hour Timeframe (April 29 – May 29, 2019)

Latest Italian stock market price chart.

Chart by IG (You can click on it for a larger image)

There has been less impact, though, in the bond markets, where the 10-year Italy/Germany government bond yield spread – the difference between the yield on the 10-year BTP and the yield on the 10-year Bund – stabilized Wednesday after its recent rise.

Italy/Germany 10-Year Yield Spread Chart, Daily Timeframe (March 12 – May 29, 2019)

Latest Italy/Germany yield spread chart.

Source: Investing.com

Looking ahead, however, fears of a global economic slowdown could damage both Italian stocks and Government bonds as investors seek safe havens – a flight also likely to damage the Euro.

Is the Eurozone Entering a Second Debt Crisis?

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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