(ANSA) - Rome, August 14 - The yield spread between 10-year Italian bonds and the German benchmark narrowed and European markets were up despite disheartening industrial output numbers in both Italy and Europe on Tuesday. The spread, a barometer of Italy's borrowing costs in the eurozone crisis, opened at 447 basis points before falling 14 points to close at 433 at the end of the day. The yield also dropped, to 5.8%. Markets were up across Europe, including Milan where the FTSE MIB index earned 0.85% to close at 14,656 points. The Frankfurt bourse was up nearly a full percentage point to close at 6,974.39. The Paris CAC 40 index earned 0.70% to close at 3,450.27. London's stock market was up 0.56% and closed at 5,864.78. Madrid's Ibex index was up 0.78%, closing at 7,124.80 points. Like Italy, Spain's borrowing costs have been under increasing pressure amid Europe's sovereign-debt crisis. But its spread between national bonds and the German benchmark bund also narrowed on Tuesday, to 519 points. Analysts said the demand for Spanish paper increased as the likelihood grows for the heavily indebted nation to request a bailout from the EU and the European Central Bank. Earlier on Tuesday Eurostat released flash estimates that Spain's economy shrank 0.4% in the second quarter, pushing it deeper into recession. The gross domestic products of both the eurozone and the European Union as a whole fell 0.2% in the second quarter of 2012 compared with the previous quarter. In the first three months of 2012, growth rates were flat at 0% in both zones, the study said. The EU's statistical office said that seasonally adjusted GDP fell by 0.4% in the eurozone and by 0.2% in the EU27 in the second quarter of 2012 compared with the same quarter of 2011. Recession-hit Italy registered Europe's biggest year-on-year drop in industrial output in June, when production fell 8.2% compared with the same month in 2011, Eurostat said in the report. Italy's industrial output dropped 1.4% in June compared to May this year.