Europe close: Italian issues lead dash higher, analysts divided

Stocks finished higher across-the-board on Monday, with investors heartened by some orthodox sound bites from top Italian officials and the absence of any headlines regarding fresh US sanctions on Chinese-made goods.

Milan-listed shares did especially well, with prices in shares of several of the country's main lenders getting a boost after the country's economy minister made further conciliatory noises at the weekend.

In an interview with Il Sole 24 Ore, Giovanni Tria said proposals for a flat income tax, a citizen's income and reversing the previous government's increase in the retirement age would be "compatible with the European Union's limits on public finances."

By the end of trading, the benchmark Stoxx 600 was higher by 0.47% or 1.74 points to 375.51, alongside a very sharp 2.30% or 471.21 point jump on Milan's FTSE Mibtel to 20,918.90.

At the top of the leaderboard in Milan were shares of lenders, UniCredit (4.67%), Intesa Sanpaolo (4.53%), Banco Bpm (4.85%) and aerospace engineer Leonardo (7.17%).

Spain's Ibex 35 joined in the FTSE Mibtel's bounce, rising 1.09% to 9,270.80, as Mediaset's Madrid-listed stock rocketed 9.79%.

The Dax-30 and Cac-40 on the other hand were up by roughly 0.2% and 0.3%, respectively.

But not everyone was onboard, with analysts at Capital Economics telling clients: "we think that a modest fiscal stimulus is still likely. Since May, senior members of the Government have flip-flopped on whether or not they would loosen fiscal policy significantly. So it wouldn’t be surprising if they reversed their position again soon, putting renewed pressure on Italian government bonds."

On a more hopeful note, Alberto Gallo at Algebris Investments argued: "Italy has been oversold and offers opportunities across corporate debt, and we believe investors have been too worried about the budget and short positions will be squeezed when fears meet a more moderate reality. We believe Italy is in the conviction phase of populist economics, but that its institutions and positive current account balance will limit the damage."

Pacing gains in Europe at the start of the week were Banks, with the corresponding sector gauge up by 0.88% to 154.95, as the yield on the benchmark 10-year Italian government note fell back by 13 basis points to 2.91%, alongside a 0.60% rise to 239.60 for the Stoxx 600 sector index for Telecommunications

Giving Telecommunications a lift was the decision by strategists at Deutsche Bank to revise their recommendation on the space from 'underweight' to 'overweight'.

Commenting on the situation in markets at the start of the week, Mike van Dulken at Accendo Markets said: "Calls for a positive open come after a mixed start to the trading week in Asia, where Chinese bourses were down following a weekend of worry over all-but-guaranteed US trade tariffs on an additional $200bn of Chinese imports.

"Japan is the only green spot thanks to better than expected overnight economic growth figures."

Data released overnight showed China's trade surplus with the US hit a record $31.05bn in August, which was up from $28.09bn for July.

That was even as the country's overall pace of export growth slowed in US dollar terms, although analysts at Capital Economics emphasised that in volume terms export growth was steady.

In other economic data, the Sentix institute's investor confidence index slipped from a reading of 14.7 for August to 12.0 in September (consensus: 14.3).

Meanwhile, the French central bank's industrial confidence index for August rose to a reading of 103.0, after a print of 101.0 in July.