Milan, European financial markets weaken

Spread between Italian, German bonds rises to 250 basis points

Milan, European financial markets weaken

Milan, August 21 - European financial markets, including Milan's top stock exchange, were weak on Wednesday as investors fretted over news expected from the United States Federal Reserve and the implications for the world economy. The FTSE-Mib fell by 0.72% to close at 16,877 points as European investors waited for word expected late Wednesday evening from the minutes of the US Federal Reserve's Open Market Committee. The minutes of its July meeting are expected to offer clues as to what the central bank will do in terms of reducing its purchase of assets. At present, the Federal Reserve is buying about $85 billion US per month in bonds to stimulate economic growth, but it is expected to begin tapering off those purchases sometime this fall. The uncertainly added to pressure on Italian bonds and helped to widen the spread between Italy's 10-year bond and its German counterpart. That closed at 250 basis points, up slightly from Tuesday's close of 247 basis points. The yield on Italian 10-year paper closed at 4.37%. 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 slipped by 0.18% to close at 8,285.41 points, while Paris's CAC 40 shed 0.34% to close at 4,015.09 points, and Spain's IBEX 35 fell by 0.48% to 8,461.80 points. The worst loss was reported in London as the FTSE index of leading British shares fell by 0.97% to end trading at 6,390.84.

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