Italian Banks Buoyed by Lagarde ECB Nomination, Budget Reprieve
July 04 2019 - 9:31AM
Dow Jones News
By Carlo Martuscelli and Adriano Marchese
Shares in Italian banks rallied Thursday, as the nomination of
Christine Lagarde to head up the European Central Bank and the
European Commission's decision to not slap Italy with a fiscal
disciplinary measure helped shore up confidence in the sector.
At 1226 GMT the FTSE MIB was by far the biggest gainer among
major European bourses, trading 0.7% higher, with shares of Banca
Monte dei Paschi di Siena SpA (BMPS.MI)--up 13% to EUR1.34--leading
the gainers on the Italian exchange. UniCredit SpA (UCG.MI) was up
3.9% at EUR11.57 and Intesa Sanpaolo SpA (ISP.MI) was 2% higher at
EUR2.02.
The nomination of Ms. Lagarde, managing director of the
International Monetary Fund, to lead the ECB triggered a fall in
European bond yields across the board Wednesday, from core to
periphery.
Italian 10-year bond yields trade at 1.624%, down 1.6 basis
points on the day and down from 2.079% from Friday last week,
according to Tradeweb. Banks in the country, which hold a
significant proportion of the government's debt, benefit from
falling yields.
Dermot O'Leary, an analyst at brokerage Goodbody, said Ms.
Lagarde is expected to continue the easy-money policies rolled out
by her predecessor, Mario Draghi. The measures helped Europe's
distressed economic system during the financial crisis but drew the
ire of German bankers who opposed below-zero interest rates and the
ECB's bond-buying program.
"More importantly, she is a politician that has been deeply
invested in the success of the euro area project," Mr. O'Leary
said. "A more conventional central banker, particularly one with
the credentials of the Bundesbank, would have decreased the
probability of more unconventional policies being used in the
future."
Italian banks are also benefiting from the Commission's decision
on Wednesday to not ask the Economic and Financial Affairs Council
to open an excessive deficit procedure against Italy after the
Italian ministry of finance gave evidence of improvements to the
country's 2019 state accounts. The decision to not impose
corrective budgetary measures on Italy contributed to improving
sentiment toward its finances.
On Monday, Rome had said its budget would now have a nominal
deficit of 2.1% of gross domestic product, well within the EU's 3%
limit. However, the government wouldn't provide detailed assurances
on the 2020 draft budget, a condition requested by the EU, but only
committed to meeting the stability pact requirements for that
year.
Write to Carlo Martuscelli at carlo.martuscelli@dowjones.com and
Adriano Marchese at adriano.marchese@dowjones.com
(END) Dow Jones Newswires
July 04, 2019 09:16 ET (13:16 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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