Chemistry Board

Vote Deadlock In Italy

Investors took fright at the prospect of prolonged political instability in Italy following a resounding electoral rebuff to austerity measures, with a spike in bond yields and sharp sell-off in equities.

Official results of the parliamentary elections released on Tuesday confirm that the eurozone’s third largest economy is heading for months of political deadlock.

Yields on 10-year Italian debt shot up by 44 basis points to 4.92 per cent, before falling back to 4.7 per cent as markets digested election results that leave little hope of any party mustering a governing majority. The spread over Bunds rose to 347 basis points and then dropped to 335bp.

The Milan stock market was down 4.36 per cent by 08.30 GMT on Tuesday while stocks in Asia were also significantly down. A further indication of investor reaction to the results will come on Tuesday when the government auctions €8.75bn in six-month bonds.

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