European stocks rally, spreads narrow

IMF backs Italian tax reform

European stocks rally, spreads narrow

(ANSA) - Milan, October 1 - European stock exchanges gained ground while bond spreads fell on Monday on news that the International Monetary Fund (IMF) backed tax reforms in Italy and Spain would not face a rating downgrade if it sought financial help from Europe. The IMF voiced support for a tax bill currently under examination in the Italian parliament, saying the reform would make a "significant improvement" to Italy's tax system - strategically and structurally - by streamlining and adding transparency. Milan's FTSE MIB outshone other European markets Monday, rising 2.83% to close at 15,523 points. Banks, the television company Mediaset and cement maker Buzzi did particularly well, though it was difficult to find a losing stock on the Milan bourse Monday. Even automaker Fiat Industriale rose despite its report that auto registrations in Italy contracted 25.74% in September, marking the worst September results since 1984. Fiat also reported it had gained 0.6% market share to take 30.3% of Italy's vehicle market. Other European markets closed in positive territory as well, with Paris's CAC 40 rising 2.39%, London's FTSE-100 up 1.37%, Madrid's Ibex 35 gaining 0.98% and Frankfurt's DAX rising 1.53%. Even Athens's General Index edged up 0.72%, although the troika - the European Union, the European Central Bank and the International Monetary Fund - appeared to have failed to reach an agreement with the Greek government on Monday. The troika's earlier meeting Monday with Finance Minister Yannis Stournaras ended in a stalemate over 2 billion euros. A second meeting, this time with Greek Premier Antonis Samaras, probably failed to find a deal, the media quoted local analysts as saying. Their judgement was based on the brevity of the second meeting, which lasted just 35 minutes. Meanwhile, the Spanish government did not ask for any financial aid during a Monday meeting with the European Commissioner for Economic and Monetary Affairs Olli Rehn, though Fitch Ratings Managing Director David Rilet told Bloomberg Television that Spain was "rather close" to asking aid from the EU. Importantly, Riley added that a bailout would not trigger a rating downgrade for Spanish bonds. The spread, a barometer of Spain's borrowing costs in the eurozone crisis, narrowed Monday, with the difference between Spanish bonds and the German benchmark closing at 442 basis points. The yield on Spanish 10-year bonds closed at 5.8%. The spread between interest rates on Italian and German 10-year bonds fell eight points Monday to close at 362 basis points. The yield on Italian bonds was 5.07%.

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