Italian banking shares moved higher on Monday following reports that their capital positions are above the levels required by the European Central Bank – in what analysts have described as "not so bad news."
Italian banks have been at the forefront of many investors' concerns. Since the appointment of the current anti-establishment government and the subsequent promises to increase public spending, money managers have been worried that the country could be in trouble given its high level of public debt. These concerns have raised Italy's borrowing costs and added pressure on the profitability of Italian banks.
Furthermore, recent data has also shown that the economy has entered a technical recession in the last quarter of 2018. Lower economic activity could restrict the bank's ability to make business. Credit rating agency Moody's warned last week that if the recession were to continue over the coming quarters there would be "negative consequences for banks including negative effects on performance, higher nonperforming loan (NPL) inflows, and ultimately banks' capital."
However, news that the capital positions of certain banks are higher from what regulators have demanded has brought some relief.
"After consistent negative news impacting the whole European banking sector, we have finally seen some 'not bad' news," Tom Kinmonth, fixed income strategist at ABN Amro told CNBC via email on Monday.