Spread narrows to 253 points as markets calm

European financial markets fall but Milan takes gains

Spread narrows to 253 points as markets calm

Milan, August 28 - After two days of deep losses, Milan's top stock exchange regained some ground Wednesday, as investors re-considered Italy's shaky political environment. The FTSE-Mib, which fell by 2.10% on Monday, and shed another 2.34% on Tuesday, actually gained about 0.98% on Wednesday to close at 16,743 points. Investors seemed more optimistic that Italy's fragile coalition government would find a compromise on a controversial property tax, and survive a vote Wednesday on how to handle changes to the tax. However, uncertainty continued to roil many other European and global markets as investors considered the likelihood of international intervention in the dispute in Syria and what the might mean for energy prices and the nascent economic recovery around the globe. The calmer period in Italy, however, helped to ultimately reduce pressure on Italian bonds, although at one point during the day, the spread widened to 265 basis points between Italy's 10-year bond and its German counterpart. But markets calmed by the end of the trading day and the spread narrowed to close at 253 basis points, down from Tuesday's close of 260 basis points. The yield on Italian 10-year paper closed at 4.41%, down slightly from the 4.44% one day earlier. 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 dropped by 1.0% to close at 8,157.90 points, while Paris's CAC 40 shed 0.20% to close at 3,960.46 points, and Spain's IBEX 35 edged up by 0.05% to 8,398.10 points. In London, the FTSE index of leading British shares lost 0.63% to close at 6,400.59.

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