BY Giovanni Legorano
MILAN--Italian banks are taking a huge hit at the outset of Tuesday's trading session in Milan following election results that produced a hung parliament with no clear political majority in the upper house.
Large banks such as UniCredit SpA (>> UniCredit SpA), Intesa Sanpaolo SpA (>> Intesa Sanpaolo SpA) and Banca Monte dei Paschi di siena SpA (>> Banca Monte dei Paschi di Siena SpA) all failed to open at the beginning of the trading session.
When they did open they were trading down at levels ranging from -7% and -10%.
"Political instability is taking a toll on government bonds, which Italian financial companies are stuffed with, so they are the ones which suffer most," said Vincenzo Longo, a strategist at IG Markets in Milan.
The yield on 10-year Italian bonds surged 46 basis points to 4.82% on Tuesday, according to data from Tradeweb, after the inconclusive set of election results triggered fears of renewed political instability for the country.
With the counting of votes ending in the early hours of Tuesday, the left-wing coalition led by the Democratic Party's Pier Luigi Bersani gained a razor-thin victory in the lower house of parliament over the center-right coalition headed by Silvio Berlusconi. By leading the vote count in the lower house, the Democratic Party automatically gets the majority of seats and, therefore, is likely to receive the mandate to form a government.
However, in the Senate, although the center-left is the biggest single party after the vote, it is well short of an overall majority. Italy's parliament is made up of the Chamber of Deputies and Senate, both with equal powers.
Assicurazioni Generali SpA (>> Assicurazioni Generali SpA), Italy's largest insurer by assets which has a large government bond portfolio, was also suffering in Tuesday's trading session.
At 0901 GMT Generali was down 5.84%, UniCredit 7.8%, Monte dei Paschi 7.3% and Intesa 8.1%. Milan's FTSE MIB was down 4.1%.
Write to Giovanni Legorano at email@example.com