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Italian stocks plunge over US monetary policy

The Italian stock market fell by 3.0 percent in mid-day trading on Thursday owing to concerns about US monetary policy and the outcome of legislative elections in Italy on Sunday and Monday.

The leading Milan stock index, the FTSE Mib, was pulled down by banking stocks and by shares in the Mediaset company, owned by Silvio Berlusconi who is bidding to return to power in the elections.

The Milan stock market, in line with other European markets, has been undermined by concerns about the outlook for monetary policy by the US Federal Reserve central bank.

This has been extremely relaxed and therefore supportive of stock prices, but signs have emerged of pressures within the bank to consider winding down the easy-money policy.

Traders were also concerned about the latest indicator on the state of the eurozone economy which they said was worrying.

A third factor of concern is uncertainty about legislative elections in Italy on Sunday and Monday, and the outlook for radical economic reforms put in place by the government of technocrats led by Mario Monti.