Milan

Spooked by Cyprus, Milan bourse makes losses

Bond spread climbs sharply

Spooked by Cyprus, Milan bourse makes losses

Milan, March 18 - Market turmoil sparked by the situation in Cyprus pelted the Milan stock exchange and the Italian bond market in early trading on Monday. Cyprus announced at the weekend that it would seize money from bank accounts to comply with European bailout conditions, sending shockwaves across European markets and leading to a rush of bank withdrawals in Cyprus. The Cyprus parliament scheduled an emergency session to discuss the plan on Monday. Milan's FTSE MIB index opened Monday morning down 2.85% at 15.600 points, with Italian banks taking the brunt. Trading in Mediobanca had to be suspended due to volatility. When trading commenced again, the stock lost 4.3%. Meanwhile Unicredit and Intesa Sanpaolo lost 4.9% and 3.49% respectively. The FTSE MIB had rebounded somewhat by 11:00, when it was down 2.01%. The Italian spread opened on Monday at 334 basis points, up 20 points over Friday's close, while the yield on the Italian 10-year paper was 4.75%. By late morning the difference between interest rates on Italian bonds and the German benchmark had receded to 327 basis points, with the yield on Italian 10-year bonds averaging 4.66%. The spread is a key measure of Italy's borrowing costs and of investor confidence in the country's ability to weather the eurozone crisis. Meanwhile, on Monday the president of the Italian market watchdog CONSOB sought to calm market fears. ''I wouldn't dramatize (the situation). Cyprus is a very small reality. I really don't believe that crisis could spread from Cyprus to Italy,'' Giuseppe Vegas said at the margins of a conference in Milan.

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