Italian financial markets cheered by confidence vote
Vote to support coalition government lifts investors' spirits02 October, 16:56
Milan's key FTSE Mib gained as much as 1.74% in afternoon trading before settling for 0.52% increase to reach 18,071.41 points shortly before markets closed for the day. Letta's government won a do-or-die confidence motion in the Senate by 235 votes in favour compared with 70 against. The outcome was a foregone conclusion after centre-right leader Silvio Berlusconi changed direction and told his People of Freedom (PdL) lawmakers to support the government in the vote.
Berlusconi, who is facing ejection from the Senate over a definitive fraud conviction, had earlier this week tried unsuccessfully to convince his PdL party to withdraw all support for Letta's coalition government.
That might have triggered new national elections and economic chaos.
Bond markets were also upbeat on the political news, narrowing the spread between Italy's benchmark 10-year bond and its ultra-safe German counterpart.
The spread, which hit 280 basis points on Monday during nervous trading over the political situation, slipped as low as 254 basis points late Wednesday afternoon after the confidence vote.
However, the yield on Italy's 10-year paper was stuck at 4.36%, only slightly lower than Tuesday's close of 4.40%.
The spread between lending rates in the two countries is an important indication of investor faith in the Italian economy, and the government's ability to work cooperatively to cope with a lingering recession.