“LONDON (AP) — Italy’s stock market was the big gainer Monday at the start of an action-packed week in financial markets, as investors cheered the news that a new government was ready to take the helm after two months of political deadlock.
Italy’s new coalition government led by Premier Enrico Letta brings together forces from both the left and the right and will begin its work after a confidence vote later Monday in Parliament.
As the third-biggest economy among the 17 European Union countries that use the euro, Italy is hugely important to the future of the single currency. It has the second-highest debt burden in the eurozone after Greece so remains under market pressure to keep a lid on its borrowings. Over the past couple of years, Italy has done a lot to bring its debt down but at a high cost, with the economy back in recession and unemployment on the rise.
“Given the fractious nature of Italian politics, the new government headed by Enrico Letta is indeed progress,” said Michael Hewson, senior markets analyst at CMC Markets.
“However it was done without any of the protagonists who had led Italy’s main political parties in the original election campaign, which could bring into question the democratic legitimacy of the entire process with technocrats in a number of key positions,” he added.
Despite those worries, Italy’s FTSE MIB index was outperforming all its peers, and some. It was trading 1.7 percent higher at 16,839. And in another sign of optimism, the yield on the country’s benchmark 10-year bond dropped around 0.10 percentage point to 3.93 percent. That’s the first time it has dropped below 4 percent since November, 2010.
The euro was also solid, trading 0.4 percent higher at $1.3078….”
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