Napolitano re-election helps Italian stocks and bonds

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Napolitano re-election helps Italian stocks and bonds

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Hopes of an end to two months of political deadlock had a positive effect on Italy’s financial markets on Monday.

The main share index in Milan was up two percent by mid afternoon and the cost of borrowing for the Italian government fell after the re-election of 87-year-old Giorgio Napolitano suggested parties may be nearer a deal to form a government.

Trader Edoardo Liuni said the investment world is now looking more kindly on Italy: “International investors welcomed the re-election of President Napolitano and, with that, the untangling of this political deadlock that Italy has been trapped in for several weeks and that international investors have been focused on.”

The share price of Italy’s banks – and others around Europe – rose as they would benefit from the ending of the political stalemate because they have invested in Italian government bonds.

However the markets remain cautious .. as there is still much uncertainty around the situation.