LONDON (Reuters) - Italian stocks, short-term bonds and the euro all struggled on Thursday after two reports within 24 hours indicated that the government is poised to reduce its 2019 growth forecasts.
Reuters had reported on Wednesday that Rome was gearing up to cut its estimate to 0.3 percent or 0.4 percent, from 1 percent previously, and raise its budget deficit estimate to about 2.3 percent of gross domestic product.
A government source had said the Treasury estimated that under an unchanged policy scenario the new growth number would be even lower at 0.1 percent, though that should receive a lift from a stimulus package due to be approved by cabinet this week.
The government’s current targets were set only a few months ago, in December, and a deficit forecast of 2.04 percent of GDP was agreed only after a lengthy tussle with the European Commission.
The news was circulating for almost a day before markets reacted fully.
Bloomberg published a similar story focussing on the 0.1 percent forecast rather than the stimulus-adjusted 0.3-0.4 percent estimate.
The Milan stock market clawed back some ground as trading drew to a close, but the index still looked set to finish in the red and the euro remained stuck near $1.1220.
Italian 10-year bond yields retraced their 3-4 basis point rise after the report to stand at 2.51 percent, though more sensitive two-year yields remained a fraction higher.
Reporting by London markets team; Writing by Josephine Mason; Editing by David Goodman