Italian worries see shares tumbling across Europe

Cloud with a Silvio lining: splits in Berlusconi's government have made the promised austerity measures even more remote

11 April 2012

Shares across Europe endured a morning of turmoil as heavy selling amid concerns about Italy joining the queue of troubled European nations at one stage triggered a 4% rout in some Mediterranean countries' markets.

The pound dropped more than a cent against the dollar to a six-month low of $1.58, as investors sought safe havens.

However, the selling pressure was eased later as Italy managed to successfully get away an auction of 6.75 billion (£6 billion) of sovereign debt. Although it had to offer a big rate of interest to attract bidders, there was a relief that the full amount of debt had been placed.

Calm was also restored by rumours that the European Central Bank had been buying the debt of so-called peripheral countries - the likes of Greece, Ireland and Portugal - in a bid to shore up confidence.

The Italian stock market, which had fallen nearly 5% earlier, recovered to be broadly flat, while Spain was 1% down.

The FTSE 100 Index bottomed to 5793.04 before recovering to be down 85.7 at 5843.46.

Italy sold 6.75 billion of 12-month debt for 3.67% compared with 2.147% at its last similar auction.