Italy’s FTSE MIB set to enter bull market

Bloomberg

Italian stocks extended their 2019 rally on Wednesday, with the FTSE MIB benchmark set to enter a bull market, boosted by positive economic data.
The benchmark gauge rose 1 percent and has gained 20 percent since reaching a two-year low on December 27 in a broad-based advance led by stocks including Ferrari NV and UniCredit SpA.
March’s composite PMI data for the country showed a bigger increase than economists had expected, easing concerns of a prolonged recession. Renewed hopes over global trade also helped investors shrug off worries about the country’s fractious populist government. The euro snapped a six-day decline and Italian bonds erased earlier declines, with the 10-year government bond yield down 2 basis points to 2.51 percent.
“Things have gone relatively quiet on the political front, and the macro figures we got today are better than what people had feared,” said Andrea Tueni, head of sales trading at Saxo Banque France. “This is fueling the catch-up rally in Italian shares that we’ve seen since the start of the year. At the end of 2019, traders were excessively pessimistic about the country, so we’re seeing a lot of short covering.”
A tightening spread between Italian 10-year bonds and their German equivalents, no downgrade by Fitch Ratings in February and expectations of a coalition break-up leading to a more market-friendly administration contributed to the positive performance, IG Markets strategist Vincenzo Longo said. The rightist League and the anti-establishment Five Star Movement have been locked in near-constant wrangling over policies ranging from an Alpine rail link project to immigration, tax policy and security, with the League gaining ground in recent local elections.
The FTSE MIB had entered a bear market in October after falling since the League and the Five Star Movement started talks to form a government in May, and fell further during the budget showdown with theEU.
Some analysts note that the positive mood may not last, with the upcoming European elections potentially having significant implications for the political outlook in Italy, and thus for
investors.