Europe midday: Stocks bounce on Italian budget hopes
Stocks across the Continent are staging a bounce amid hopes that the worst scenarios in the ongoing budget tussle between Brussles and Rome may finally be averted.
Nevertheless, earlier in the session, the European Commission had judged that starting an Excessive Deficit Procedure against Italy was justified.
"Our analysis suggests that the debt rule must be considered to have not been respected. We conclude that the opening of a procedure for excessive deficit based on the debt is therefore justified," the European Union's executive arm said in a report.
Against that backdrop, as of 1236 GMT the benchmark Stoxx was higher by 0.48% or 1.57 points to 352.66, alongside an advance of 0.72% or 81.89 points to 11,148.30 for the German Dax, while the FTSE Mibtel was advancing by 0.81% or 149.48 points to 18,621.80.
In parallel, the yield on the benchmark 10-year Italian Treasury note was retreating by 10 basis points to 3.52%.
Commenting on the price action in markets, IG's Chris Beauchamp told clients: "Italian stocks and bonds are rising sharply at the start of trade today, as optimism filters through on the hope of a breakthrough in talks between the new populist coalition and the European Commission.
"Comments from the Italian deputy Prime Minister point towards a potential compromise over the planned budget, reducing the expected debt burden and reducing the risk of an acrimonious breakdown in relations between the EU and its fourth largest economy. The euro has been under pressure from fears surrounding an Italian standoff that showed little signs of resolution, yet with some compromise from both sides, we could see one of the biggest risk factors removed for euro traders."
On a related note, also on Wednesday, the Organisation for Economic Cooperation and Development projected that Italy's gross domestic product would slow to just 0.98% in 2019 and 2020, weighed down by heightened uncertainty and higher interest rates, which it said would weigh on both consumer spending and firms' investment plans.
There were no major economic releases in the euro area on Wednesday.
For later in the day, in the US, investors were waiting on the release of reports on durable goods orders and existing home sales referencing the month of October at 1330 GMT and 1500 GMT, respectively.