Signs are now abundant that growth in Italy is coming back to life along with Eurozone. Euro zone’s third largest economy’s rebound is very vital as it holds second highest Debt/GDP ratio close to 130% after Greece. This was one of the contributing factors that led to the rise in Italy’s 10 year benchmark yield around 7%.
- Italy has successfully reduced budget deficit to 3% of GDP from 5.5% in 2010. Return of growth would further improve the ratio.
- Today’s manufacturing PMI indicates that growth is gaining momentum. For April PMI moved up to 53.8 from 53.3 in March. April registered further gains in new orders and output level resulting in stronger employment. PMI reading for April 2015, stands highest in four years, only second to 54 in April, 2014.
- Weaker Euro is helping Italy to become powerhouse for manufacturing, with new orders rising sharply. Companies in China are reported to be using lower Euro to manufacture goods in Italy to boost their brand, with a “Made in Italy” stature.
Improved economic conditions and domestic as well as foreign demand would provide boost to Italy’s benchmark FTSE MIB (ITA40) stock index, which as of now is trading at 22980 and still remains a good buy over medium term. In short term price pattern indicates of correction. Averaging close to 20000 level, would be very attractive.
The material has been provided by InstaForex Company – www.instaforex.com