Milan, other European markets fall sharply Wednesday

Markets fearful of European slowdown, US fed's policy measures

Milan, other European markets fall sharply Wednesday

Milan, May 23 - Milan's leading financial market, like most of its European counterparts, fell sharply on Wednesday over growth concerns in the region and the monetary policy outlook in the United States. Milan's FTSE-MIB dropped by fully 1.61% on investors' fears during Wednesday's trading, to end the day at 17,237 points. Earlier in the day, the Organization for Economic Co-operation and Development (OECD) warned that it expected Italy's recession to be deeper than it previously feared for 2013, and that unemployment will likely continue to climb. The OECD said it had revised downward its gross domestic product forecasts for Italy just a month after its last report on the Italian economy. The country is enduring its longest recession in over 20 years after registering seven consecutive quarters of economic losses. The Italian economy will slide by 1.8% in 2013, a worse decline than the previously forecast 1.5% in economic losses, the OECD said. And the eventual rebound will be constrained: GDP should rise by just 0.4% in 2014, compared to 0.5% in the previous forecast. The OECD expects unemployment in Italy to rise from 10.6% reported in 2012 to 11.9% this year and 12.5% next year. Meanwhile, investors were also nervous that the U.S. Federal Reserve may begin to reverse its stimulus programs designed to boost economic growth. Some investors see signs of improvements in the mighty U.S. economy as the kind of signals that will lead the American central bank to ease back on providing stimulus. All of these market concerns widened the spread between Italy's 10-year bond and its German counterpart, which closed at 265 basis points. That was considerably wider than Tuesday's close of 253 basis points. The yield on Italian 10-year paper closed Wednesday at 4.18%. The spread between lending rates in the two countries is seen as an indication of investor faith in the Italian economy and its ability to cope with a lingering recession. On other European markets: Frankfurt's DAX lost 1.70%, closing at 8,336.58 points, while Paris's CAC 40 tumbled by 1.89%, closing at 3,974.12 points, and Spain's IBEX 35 shed 0.82% to close at 8,441.70 points. London's FTSE 100 dropped sharply on the day, losing 1.99% points to close at 6627.17 points.

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