Milan bourse suffers again amid turmoil

Spread crosses 150-point threshold before sliding back

(ANSA) - Milan, February 9 - The Milan bourse suffered again Tuesday amid fresh turmoil among banking stocks and faint echoes of the financial and monetary crisis of 2011.
    The blue-chip FTSE-Mib index closed 3.21% down at 15,913 points. Banking losers included Carige (-10%), Ubi, Banco Popolare and Bpm (-8%), Unicredit (-7%), and Intesa (-6%).
    Fears of a slowdown in global growth, particularly in China, the United States and the emerging economies, were said to be one of the factors behind the stock market's renewed weakness.
    The slumping price of oil, fuelling fears that inflation targets of 2% will not be met, was also said to be a factor behind the new losses.
    But the woes of Italian banks, including their high ratio of non-performing loans (NPLs), were seen as the greatest drag on trading for the umpteenth session despite government plans to deal with the problem via a bad bank.
    The turbulence followed Monday's massive losses on the international money markets when the FTSE Mib closed fully 4.69% down.
    The spread between Italy's 10-year BTP State bond and the German equivalent dropped back to 144 basis points by the close Tuesday after briefly going over the 150-points threshold earlier in the day. On Monday the spread, an important yardstick of investor confidence and of Italy's borrowing costs, closed at 146 basis points, the highest level since July 2015.
    Greece's spread closed above 1,000 euros, its highest since August.
    Other European stock markets also suffered big losses with Athens losing 2.8%, Madrid 2.32%, Paris 1.6%, Frankfurt 1.1% and London 1.0%.
    In all, European bourses saw another 130 billion euros go up in smoke Tuesday - about the same as Monday - as the Stoxx 600 index lost 1.48%.
    Milan alone lost 13 billion.
    The high volatility of banking stocks "is not led by Italian banks or by other large banks," European Union sources said Tuesday. Banks and growth will be the focus of Thursday's Eurogroup meeting, they said.
    The spectre of a crisis on the stock and FOREX markets like 2011 is "hovering but we're not there yet," LUISS University economist Marcello Messori told ANSA Tuesday.
    "Any economist would be wondering if we have returned to the 2011 financial crisis with a plunge of the banking sector and tension on spreads...but we're not there, or at least not yet," said Messori, director of LUISS's prestigious school of European economics.
    Warding off a repetition of such a crisis, in Messori's view, are "more robust" European institutions, the European Central Bank's response with non-conventional monetary policies, and an EU budget policy that is "no longer recessionary but moderately expansionist".
    However, there are "objective data" that are troubling, Messori told ANSA.
    "Compared to a year ago the macroeconomic picture is worsening, not only in the emerging countries but also in China and the US where the rate of growth is ever more fragile. "Europe and Italy still have too modest growth rates. In this situation a global growth engine is missing".
    If, on the one hand there is a need to relaunch aggregate demand in Europe and bolster productivity, Messori said, on the other hand banking woes persist.
    "In a certain respect an issue highlighted repeatedly by the International Monetary Fund is coming home to roost, that the European banking sector has not fully cleaned up the after-effects of the 2007-2009 crisis," he said. In Italy, then, there was a major problem of problematic loans, he said.
    This problems had been "exacerbated," Messori said, by new EU rules which have backdated more rigid criteria to older loans, creating tension.
    "It is crucial," he said, "that we at least have a common guarantee on deposits, and we need very strong policy initiatives to avoid a gradual return to 2011".
    Premier Matteo Renzi said in his e-news Tuesday that "the financial world is struggling. "Italy is not the epicentre of the crisis, which unfortunately has many causes: oil, geopolitical tensions, ex-emerging countries". But he said that the banking sector "must transform and consolidate itself", including via mergers.
    The government will encourage this process with upcoming moves, he said.