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Italy's new administration causes short lived market rally

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Italy's new administration causes short lived market rally

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Financial markets initially responded well to the new emergency government in Italy being headed up by Mario Monti with the Milan stock market opening up more than 1.5 percent on Monday morning. There were also positive starts in Frankfurt and Paris. However by early afternoon all the region’s main bourses were in the red.

Banks, many of which are highly exposed to Italy and Greece and have suffered through the euro zone debt crisis this summer, were flat after gaining in early trade.

The next step for Monti is presenting the names of his chosen cabinet to Italy’s President Giorgio Napolitano. Then a confidence vote will take place in both the upper and lower houses of parliament. Monti is expected to be successful in the ballot, following the decision to support him by leading members of outgoing Prime Minister Silvio Berlusconi’s party. The PDL had been split over whether to back the respected economist.