Europe close: Stocks jump on optimism ahead of Italian coalition talks

Stocks across the Continent bounced back on Wednesday amid reports of possible progress on crafting a new government coalition in Italy which would avoid having to call fresh elections.

The day before, Italian Prime Minister, Giuseppe Conte, had tendered his resignation, paving the way for two days of consultations between the President, Sergio Mattarella, and the country's various political parties to see whether a new coalition was possible or if new elections were needed.

Former Democratic party leader, Matteo Renzi, reportedly told France 2TV that his party should try to form a government.

But according to ANSA, current PD leader, Nicola Zingaretti, said that for any coalition to be possible, then the Five Star movement would need to commit to seeing out the full three years left to the current legislative term.

By the end of trading, the pan-European Stoxx 600 was ahead by 1.21% at 375.80, alongside a rise of 1.30% to 11,802.85 for the German Dax while the Cac-40 was rising by 1.70% to 5,435.48.

But it was the FTSE Mibtel that fared best, bouncing back by 1.77% to 20,847.07.

In the background meanwhile, traders were trying to anticipate whether US central bank chief, Jerome Powell, would use a speech on 23 August to flag further rate cuts and if there was any chance of a larger than expected 50 basis point reduction when policymakers at the Fed next met on 17-18 August.

Nonetheless, as Michael Hewson, chief market analyst at CMC Markets UK pointed out, any decision on rates would likely be heavily influenced by the August non-farm payrolls report.

Still in Europe, reports were that French President Emmanuel Macron was open to the Russian Federation rejoining the G7, possibly in 2020, if progress was made on Ukraine.

As regards US-China relations, overnight, Washington approved a controversial of 66 F-16 fighters to Taiwan, as per the two countries existing defence arrangements, resulting in criticism by Beijing.

Autos&Parts stocks did especially well, with the corresponding Stoxx 600 sector index 1.71% higher on the back of reports in the Italian media that talks between Fiat and Renault were continuing.

GEA Group shares meanwhile rose following an upgrade out of analysts at Goldman Sachs.

Osram shares were moving higher after Reuters reported that the company was likely to waive a standstill agreement with private equity groups Bain Capital and Carlyle in a move to unblock a rival €4.3bn from Austria's AMS.