Rising factory output in China and better-than-expected US hiring helped lift Asian stock markets modestly on Monday, but European shares slumped after Italian Prime Minister Mario Monti’s announcement that he intends to resign by the end of the year.
Widely credited with restoring confidence in Italy amid a debt crisis, Monti said over the weekend that he found it impossible to lead after former Prime Minister Silvio Berlusconi’s party, Parliament’s largest, dropped its support.
Milan’s FTSE Mib benchmark index of top companies slumped 3.4% to 15,169 in morning deals, as Italian government borrowing costs spiked on the back of political uncertainty. Elsewhere, London’s FTSE 100 dipped 0.2% to 5,901, while Frankfurt’s DAX 30 shed 0.5% to 7,483 and the Paris CAC 40 lost 0.6% to 3,584.
The European single currency dropped to $1.2909, down from $1.2928 late in New York on Friday. The cost to Italy of borrowing for 10 years also rose sharply.
In ripple effects felt elsewhere, Spanish economy minister Luis de Guindos said Spain will suffer contagion from Italy’s new political turmoil, while German foreign minister and European Central Bank member Guido Westerwelle warned that Italy must press ahead with reforms introduced by Monti. “Italy must not stand still... That would bring new turmoil not only to Italy, but also to Europe.”
- Reuters and AP