ECB intervenes in attempt to soothe fears
MARKETS around the world eased some of their losses yesterday after the European Central Bank stepped in to buy Italian and Spanish bonds that were sold yesterday.
Equity markets looked to be heading for another day of heavy selling and plunged at the opening but pared their losses once it became clear that the ECB was shoring up the debt auctions held by Italy, Spain and Greece.
Even so, benchmark indices fell in most western European countries. Germany's DAX Index declined 0.8pc, France's CAC 40 and the UK's FTSE each lost 1pc, while Dublin's ISEQ closed down 0.45pc.
By late afternoon, the Dow Jones Industrial Average was little changed.
"It's all this Italy stuff that's driving it," said David Jones, a market strategist at IG Index in London. "We've seen a very negative reaction on the FTSE."
Early in the day, yields on benchmark Italian 10-year bonds rose above 6pc for the first time since 1997, before retreating to 5.57pc.
Chief economist at Citigroup, Willem Buiter, said that the European Central Bank would revive its bond-buying programme to safeguard this week's auction of Italian bonds.
"The ECB will intervene on whatever scale is necessary to allow Italy to conduct its auction on Thursday," he added.
In the currency markets, the euro recovered after weakening as much as 1.5pc against the Swiss franc, falling to a record low of 1.155.
The Dollar Index, which tracks the US currency against those of six trading partners, was little changed after a two-day rally.