- Michael Seufert, an analyst at Norddeutsche Landesbank
Italy raised 11 billion euros of debt in an auction on Wednesday, with nation's borrowing rates jumping to the highest level since mid-August, as investors optimism began to fade despite all efforts by the ECB. The average yields on Italian government securities, due to mature in 2013, rose to 1.91% from 1.692% at the last auction on September 12. Demand strengthened slightly, with bids exceeding supply 1.77 times.
"There is definitely a need for deleveraging in Europe," said Michael Seufert, an analyst at Norddeutsche Landesbank in Hanover, Germany. "The danger is that this produced a downward spiral as the regulation gets stricter and stricter and the global economy cools, potentially meaning more writedowns for banks. States in the periphery are hit hardest."
"Unless confidence in the euro area is restored, fragmentation forces are likely to intensify bank deleveraging, restrict lending, add to the economic woes of the periphery, and spill over to the core," the IMF said.
The Stoxx Europe 600 Index erased 0.55 per cent to 268.71. Germany's DAX Index inched lower 0.41 per cent to 7,205.23 and France's CAC 40 Index lost 0.50 per cent to 3,365.87.
© Dukascopy Bank SA