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Banks lead Italian stock market lower after bond sell-off

Italian equities faced another day of pressure, hitting a 13-month low, amid further selling of bank shares on concerns about the fraught political situation.

The benchmark FTSE MIB index fell as much as 2.2 per cent immediately after the open of trade in Milan. In more recent action, it cut its fall to 1.44 per cent.

Italian banks were among the worst performers across European bourses for the second consecutive day. Ubi Banca fell almost 5 per cent, UniCredit shed 3.3 per cent and Intesa Sanpaolo was off 3.1 per cent.

Dramatic moves in Italian fixed income markets on Monday and Tuesday underscored the growing sense of angst over the future of Italy’s government. After the breakdown over the weekend in the coalition between the Five Star Movement and the League, many analysts are expecting snap elections to be called in the autumn.

The concerns also slipped into the currencies market on Tuesday, with the euro dropping to its lowest level since November 2017.

At the other end of the spectrum, assets perceived as havens got a bid on Tuesday. German Bund and US Treasury yields both fell, signalling higher prices. Meanwhile, the Japanese yen climbed 0.5 per cent on the US dollar.

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