Italy’s non-seasonally adjusted industrial sales rose 0.5% year on year in February. This followed a 1% year-on-year fall in the previous period.
We are seeing a positive signal from Italy’s industrial sector with the turnaround in February’s sales data. This shift from a 1% decline to a 0.5% gain year-over-year suggests a potential bottoming out of the industrial weakness we observed in late 2025. This data supports a cautiously optimistic stance on European assets.
Implications For European Equities
This economic improvement, reinforced by the recent S&P Global Eurozone Manufacturing PMI for April which held in expansionary territory at 50.8, should be viewed as a reason to add bullish exposure. We should consider buying call options on the FTSE MIB index, particularly for expirations in the third quarter to allow the recovery trend to mature. The index has already gained nearly 4% since the start of April, showing investor confidence is building.
The strengthening data could also provide support for the Euro, which has been lagging against the dollar. Looking at EUR/USD, this positive Italian data contrasts with some mixed signals from the U.S. economy, potentially creating an opportunity for the pair to move higher. We believe that buying near-term EUR/USD call spreads is a cost-effective way to position for a potential rally toward the 1.10 level.
From a fixed income perspective, a stronger Italian economy reduces sovereign risk, which we’ve seen reflected in the bond market. The spread between Italian 10-year BTPs and German Bunds has already tightened to 125 basis points, down from over 150 basis points earlier in the year. Traders could look at selling out-of-the-money put options on BTP futures, collecting premium on the view that a significant sell-off is now less likely.
This small piece of positive news can also dampen market fears, which typically leads to lower implied volatility. The VSTOXX index, which measures Euro Stoxx 50 volatility, has already drifted down to a multi-month low of 13.5. We see an opportunity in selling VSTOXX futures if this trend of stable, positive economic surprises continues in the coming weeks.
