Milan loses ground while other European markets rise

Spread between Italian, German bonds widens

Milan loses ground while other European markets rise

Milan, June 25 - The Milan stock exchange posted losses on Tuesday while most of its European counterparts showed some strong gains. Milan's FTSE Mib index fell by 0.36% to close at 15,056 points. Meanwhile, the spread between Italy's 10-year bond and its German counterpart closed at 305 basis points, up from Monday's close of 301 basis points. At one point during the day, the spread reached 310 basis points, indicating significant investor concern. 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. The yield on Italian 10-year paper closed at 4.85%. Investors may have lost some confidence in weaker markets such as Italy after Mario Draghi, president of the European Central Bank, said that the ECB would not tamper with bond markets. ''The ECB will not act to compress spreads artificially,'' Draghi said during a speech Tuesday in Berlin. ''On the contrary, we think that the spread naturally should reflect the tax position of sovereign states and the economic outlook,'' he added. Earlier in the day, he gave equity markets a boost by saying the central bank has no plans to unwind its monetary policy position. On other European markets, Frankfurt's DAX jumped by 1.55%, closing at 7,811.30 points, Paris's CAC 40 climbed by 1.51%, closing at 3,649.82 points, Spain's IBEX 35 gained 0.72% to close at 7,607.70 points, and London's FTSE 100 rose by 1.21% to end trading at 6,101.91.

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