Italian stocks surge while bonds under pressure

MILAN: Italian stocks rose 3.81 percent in early afternoon trading on Thursday in a highly volatile climate, with investors responding to rumours that the Greek debt rescue referendum might be cancelled.

The main FTSE Mib index, which had fallen 2.42 percent in early trading, stood at 15,854 points. Stocks also gained pace after the European Central Bank's surprise announcement it was lowering interest rates to 1.25 percent.

Long-term borrowing rates were under heavy pressure however with the yield on 10-year government bonds reaching a record of 6.4 percent. A bond yield spike in August prompted the ECB to start propping up the Italian bond market.

Leading the rally was steel tube maker Tenaris which rose 8.21 percent to 12.13 euros a share, while aerospace and defence giant Finmeccanica gained 5.86 percent to 4.73 euros and auto giant Fiat went up 4.24 percent to 4.324 euros.

Bank shares also rose sharply with UBI Banca up 4.11 percent, Intesa Sanpaolo rising 4.03 percent and UniCredit, Italy's largest bank, rising 3.83 percent.

Copyright AFP (Agence France-Presse), 2011