LONDON: Italian stocks plunged to their lowest level since November 2020 on Thursday and underperformed other European indices as Italian Prime Minister Mario Draghi’s coalition government faced a potential collapse after one of its members failed to take part in a parliamentary confidence vote.
The 5-Star Movement, a coalition member, failed to support a parliamentary confidence vote including measures to offset Italy’s cost of living crisis.
Italy’s FTSE MIB blue chip index tumbled to its lowest level since November 2020, falling 3.5% and underperforming the pan-European index which was down 2%.
“Political instability is rarely a positive for sentiment,” said Ben Jones, director of macro research at Invesco.
“The latest news had investors quickly offload holdings of Italian debt… However, we are loath to extrapolate the knee-jerk reaction today into a broader negative for Italian equities,” he said, adding that whether Italy has “enough gas to operate industry and meet demand through the winter will be the bigger driver of Italian stock performance in our view.”
The index of Italian banks, highly sensitive to bond yields, also touched its lowest level since November 2020, and was last down 5.4%.
Italian bond yields jumped on Thursday and the premium they offer over German debt jumped to the highest in a month.
Italy’s FTSE MIB is down 22.2% so far this year.
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