Italy-German spread narrows to 240 basis points
Milan, other European markets rise on optimism over Fed decision18 September, 18:36
The FTSE-Mib climbed by 0.30% to close trading at 17,804 points as the US central bank continued its second day of policy meetings, where officials were debating when and how to begin to reduce its massive purchase of financial assets designed to stimulate economic growth.
The Fed has been signalling that as the American economy regains its footing, it will begin to cut back on its $85 billion monthly bond purchases. That measure, known as quantitative easing, has been credited with keeping the US economy – and by extension, economies in many other countries – from collapse.
Italian investors were also relatively calm about an evening vote in the Senate on the future of ex-premier Silvio Berlusconi, whose seat is in jeopardy following his tax fraud conviction last month.
Berlusconi, who founded the centre-right People of Liberty (PdL) party, delivered a video address before the vote, but the topic was renewal of his Forza Italian political movement and not a call for the downfall of Italy's fragile coalition government.
Hawks in the PdL have been demanding that their coalition partners, the centre-left Democratic Party (PD), either vote to support Berlusconi in his bid to keep his Senate seat, or the PdL would withdraw from the coalition and watch it collapse.
Investor calm was also demonstrated through the stable spread between Italy's 10-year bond and its German counterpart, which closed at 240 basis points Wednesday, slightly lower than Tuesday's close of 243 basis points.
The yield on Italian 10-year paper closed at 4.39%.
The spread between lending rates in the two countries is seen as an indication of investor faith in the Italian economy and its ability to cope with a lingering recession.
On other European markets, Spain's IBEX 35 gained 0.65% to reach 9,062.50 points while Frankfurt's DAX rose by 0.45% to close at a new record high of 8,606.36 points.
In Paris, the CAC 40 gained 0.60%, closing at 4,170.40 points, while in London, the FTSE index of leading British shares shed 0.17% to close at 6,558.82.