Milan weakens after major drop in Telecom Italia

Stronger U.S. data fails to pull up European stocks

Milan weakens after major drop in Telecom Italia

Milan, July 31 - Despite sound economic data from the United States, Milan's main financial market weakened Wednesday. The FTSE-Mib shed 0.37% to close at 16,482 points, pulled lower by a drop of 6.27% in value of Telecom Italia, over concerns about the company's future direction and capitalization. At the same time, investors seemed to be losing confidence in the future of Mediaset, the media company at the centre of a key court ruling involving ex-premier Silvio Berlusconi. Italy's top appeals court, the Court of Cassation, was poised to rule on a four-year prison sentence and a five-year ban from office previously imposed on Berlusconi for tax fraud involving Mediaset. Shares in the media company fell by 1.91% on light trading late in the day. All of this offset positive news reports that gross domestic product in the United States rose by 1.7% in the second quarter, measured at an annualized rate. That was stronger than expected and exceeded the 1.1% pace in Q1, the commerce department said. Meanwhile, the spread between Italy's 10-year bond and its German counterpart was stable at 274 basis points, practically unchanged from Tuesday's close of 273 basis points. Similarly, the yield on Italian 10-year paper closed at 4.40%, unchanged from the previous day. 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 nudged higher by 0.06% on the day, closing at 8,275.97 points, while Paris's CAC 40 edged up by 0.15% at 3,992.69 points, and London's FTSE rose by 0.76% to end trading at 6,621.06. Spain's IBEX 35 shed 0.27% to close at 8,433.40 points.

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