Europe open: Stocks gain on trade deal optimism, but Italy a concern

Stocks on the Continent have started the quarter higher, boosted by news of a last-minute breakthrough in talks between the US and Canada to renegotiate the terms of their free trade area with Mexico.

According to Bloomberg, the revised trade deal offered improved access for the US to Canada's dairy market, improved intellectual property rules and tighter rules of origin for carmakers.

Nevertheless, Michael Hewson, chief market analyst at CMC Makets UK was cautious, telling clients: "For now concerns about trade, rising US rates, Brexit, Italian politics as well as a rising oil price all have the capacity to act as drag on any possible rebound as we head towards the end of the year."

As of 0917 BST, the benchmark Stoxx 600 was advancing by 0.27% or 1.05 points to 20,940.48, alongside a rise of 0.67% or 81.47 points to 12,327.79 for the Dax, although the Cac-40 was higher by a more modest 0.19% or 10.56 points at 5,50.05.

In parallel, the yield spread between 10-year German bunds and similarly-dated Italian debt was four basis points wider to 272 basis points, amid speculation that Brussels might decide to censure Rome's plans, announced on Friday, for a public deficit worth 2.4% of the country's gross domestic product in 2019 and 2020.

According to La Repubblica, there were rumours doing the rounds in Brussels that the European Commission would be forced to reject the Italian government's proposals in November.

Separately, in remarks to Il Sole 24 Ore on Sunday, Italian economy minister, Giovanni Tria, said Rome would still manage to pare its debt stock as a proportion of GDP by one percentage point over the next three years, thanks to anticipated growth of 1.6% and 1.7% in 2019 and 2020.

But to analysts at Rabobank, such assumptions looked "decidedly optimistic".

To take note of, euro area finance ministers were due to hold their weekly meeting later in the day.

On the economic front, IHS Markit's manufacturing sector Purchasing Managers' Index for September was revised down from a preliminary print of 53.3 to 53.2.

Not only was the reading for last month much lower than August's 54.6, the survey compiler said export growth was "stagnating" on the back of trade war worries, rising political uncertainty and faster inflation.

"The survey paints the worst trade picture for over five years, with export growth having slumped sharply from a series record high in late 2017 to near-stagnation in September," IHS Markit said in a statement.

In other news out of the single currency bloc, Eurostat reported that the rate of unemployment declined from 8.2% for July to 8.1% in August.

Shares of RyanAir were trading sharply lower after the Irish budget airline slashed its guidance for full-year profits by roughly 12% to a range of €1.1bn to €1.2bn.

Danske Bank on the other hand was trading higher after the Danish lender announced that Jesper Nielsen would replace Thomas Borgen as chief executive officer, on an interim basis, following the exit of latter due to his role in a money laundering scandal.