Italy wins European unity, banks lead the big rally of stocks

Italy has won the European Union project and remains in the euro area heading for new elections, while some investors are concerned that this vote will be a referendum on Italy's membership in the euro area.
According to Reuters, European financial markets showed their satisfaction. Italian banks led the sharp rise in European shares in early trading yesterday after two anti-institutional parties in Italy failed to form a government, prompting markets in the euro area to rise due to the possibility of new elections.
Italy's Miep rose 1.4 percent, as financials and utilities rose, and the Italian bank index jumped 3.1 percent on its way to record the biggest gain since January.
Shares of UniCredit, UBI Banca, Banco BPM and Antisa San Paolo rose between 2.2 and 2.8 per cent. Enel's share of utilities rose 1.9 per cent.
Banking stocks helped the Stoxx 600 index gain 0.2 percent and Germany's DAX rose 0.5 percent. Overall, trading volumes were weak as the London Stock Exchange and US markets closed on holiday.
The euro dipped its early gains and turned down after news of the new election, fueling fears that the trend would give a stronger mandate to anti-institutional parties in Italy.
After the euro rose more than half a percent during early trade in London, hitting a session high of $ 1.17285, the single currency fell 0.1 percent to trade at $ 1.1647.
The euro weakened as the dollar rallied and the gap between German and Italian bonds widened, with markets worried that a loose coalition government could be formed in Rome with two anti-institutional parties.
Against the Swiss franc, the euro rose 0.8 percent, recovering from its lowest in nearly three months, but reduced its gains in European trade by half.
Italian President Sergio Matarella, 76, put his country on a path leading to a new election by appointing a former IMF official as interim prime minister and ordering him to plan early elections and pass the next budget.
The Italian president, who is considered a respectable institutional face, has limited powers but is often seen as important in the event of a political crisis.
Matarilla refused to appoint a minister of economy skeptical of the European Union, although the name of the latter was proposed by the prime minister-designate and supported by the parliamentary majority.
This presidential power, provided for in article 92 of the Italian Constitution, angered the association (extreme right) led by Matteo Salvini and a five-star movement led by Luigi de Mayo.
Carlo Coutarelli's appointment to form an interim government paves the way for elections, likely to be a conflict over Italy's role in the European Union and the euro zone, which has led to a shake-up in global financial markets.
Coutarelli, 64, was director of the International Monetary Fund's finance department between 2008 and 2013 and became known as Mr. Sciss because of a reduction in public expenditure in Italy. Italy, the euro zone's third-largest economy, has been trying to form a new government since an inconclusive election in March ended.
Anti-institutional forces abandoned efforts to form a governing coalition over the weekend after a row with the president.
The president vetoed a 5-party party candidate and the far-right Northern League party for the post of economy minister, pushing both parties to accuse the president of betraying voters and foiling their plan to form a government.
Speaking to reporters after his appointment as interim prime minister, Kutareli told reporters the elections would take place in the fall or early next year. A source in the 5-star movement said the movement was considering organizing an election campaign with the Northern League if a new ballot was held.
The Italian party also said it would not vote for the potential government of Cotarilli. Matarella said in a televised address that he rejected the candidate, economist Paolo Savona, 81, for threatening to withdraw Italy from the euro area.
"The ambiguity of our position has worried investors and depositors in Italy and abroad," said Matarella, "Euro membership is a key option. If we want to discuss it then we have to do it in a serious way."
The Northern League and the 5-star movement reacted angrily to Matarilla and accused him of exploiting his position. The two parties spent days trying to draft a coalition deal aimed at ending a March election crisis that did not produce a decisive outcome.
The leader of the 5-star movement, Luigi de Mayo, called on parliament to hold Matarilla accountable, while Northern League leader Matteo Salveni threatened mass protests unless early elections were called.
"Without the consent of Berlin, Paris or Brussels, a government can not be formed in Italy," Salvini said, "and I call on the Italian people to stay closer to us because I want to restore democracy to the state." However, Salvini later rejected De Mayo's call, adding: "We have to keep our calm, some things can not be done in the throes of anger, I do not want to talk about accountability."
European Union states called for a "stable and pro-European" government in Italy on Monday after the president rejected the proposal to appoint a minister of economy to fight the euro against the government in a decision that blocked the attempt by two populist parties to form.
"We hope a stable and pro-European government will soon be formed in Italy," German State Secretary for Foreign Affairs Michael Roth said on arrival for talks with his European counterparts in Brussels.

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