Stocks Rise as Draghi Shows Willingness to Stay as Chancellor

Italian stocks and bonds made tentative gains on Wednesday as Mario Draghi said he would continue as Prime Minister regardless.

Speaking in the Senate, Draghi said he was willing to form a new coalition but expected the 5 Star Movement (M5S), which refused to back him in a confidence vote last week over differences on economic policy, to change its mind. "If we want to stay together, the only way is to rebuild this (government) agreement with courage and sacrifice," Draghi said, pointing to the broad support for the government among the general public and Italy's cash-strapped local governments. "This is undeserved support but I am extremely grateful for it," Draghi said. However, relief was mixed with caution, as Draghi appeared to make his very existence as PM contingent on the M5S changing its mind. "Are you ready to rebuild the government agreement?" he asked the assembled Senators. "You owe your answer to the country, not to me." The benchmark FTSE MIB stock index, which opened lower ahead of the speech, rose as much as 1% on the day before giving back most of its gains to trade at 21,669 points as of 03:30 ET (0730 GMT). The yield on the 10-year Italian government bond, which moves inversely to prices, reacted more positively: The yield fell to 3.29% from 3.44% before Draghi's speech. Italy's financial markets have great confidence in Draghi's ability to secure hundreds of billions of euros from the EU's post-pandemic reconstruction fund. Without that money, and with the cost of servicing the €2.25 trillion debt pile rising as the ECB starts to raise interest rates, markets are more nervous than ever that Draghi will cede the stage to a parliament dominated by populists from both the left and right who have been more hostile to the EU in the past.