MILAN (dpa-AFX) – In Italian financial markets, investors reacted with relief to the outcome of an important regional election. With the defeat of the right-wing opposition Lega party, analysts see the ruling coalition in Rome strengthened. In the European government bond market, Italian paper was in high demand, which is why yields came under heavy pressure early in the session. The Milan stock exchange held up much better than other European stock markets on Monday morning. The winners included shares of Italian banks.
In general, European government bonds were in demand as a safe haven for investment at the start of the new trading week due to the spread of the coronavirus. However, the prices of Italian securities rose particularly sharply from the start of negotiations. On the other hand, the yield on Italian ten-year bonds fell 0.18 percentage points, the highest level since last August. In the wake of Italian bonds, Greek government bonds also benefited, whose yields also fell sharply.
This weekend, Italian opposition leader Matteo Salvini suffered a defeat along with his right-wing populist Lega. In the Emilia-Romagna region, the Lega candidate was beaten on Sunday with 43.6% against the center-left candidate of the Social Democrats with 51.4%. The election was seen as a litmus test for the battered government coalition of the Five Star Movement and Social Democrats (PD) in Rome.
“The result is expected to significantly strengthen the ruling coalition in Rome,” said a commentary from Dekabank Market. According to Rainer Guntermann, bond expert at Commerzbank, “the risk of early elections seems to be further reduced”.
The result of the election was also well received on the Milan Stock Exchange: the FTSE MIB leading index fell slightly by 0.15% at the start of the session, but held up much better than other European exchanges. For comparison: the first index of the euro zone EuroStoxx 50 and the Dax each lost more than one percent.
The sharp rise in the price of Italian government bonds has benefited all Italian bank stocks. Unicredit bank stocks rose 1.5%, placing them at the top of the FTSE MIB. Shares of banks Intesa Sanpaolo and UBI Banca each gained more than one percent.