European stocks bounced, led by a jump in Italian banks, as investors weighed a clarification from Italy about its new tax on lenders’ windfall profits.
The FTSE MIB Index was up 1.2% after dropping the most in over a month on Tuesday as Italy said the impact of the tax may be limited for some banks and the levy won’t exceed 0.1% of a firm’s assets. UniCredit SpA and Intesa Sanpaolo SpA were among the biggest gainers. The benchmark Stoxx 600 gained 0.9% by 8:11 a.m. in London, as investor focus turned to key US inflation data due later in the week after China posted a drop in consumer and producer prices.
Among individual movers, ABN Amro Bank edged lower as it reported better-than-expected quarterly profit, although it warned costs will be higher next year than previously expected. Continental AG rose 1.7% even as it cut its sales outlook for the year on weakening markets for tires in Europe and North America.
After gaining for two months in a row, European equities have pulled back in August as investors weigh the possibility of higher-for-longer interest rates, glum economic data from China and a lackluster corporate earnings season. The next clue on the Federal Reserve’s policy outlook will come from US consumer price inflation data on Thursday.
Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital, said that the pullback may prompt “some investors to see value emerge at current levels.”
However, “we doubt that the current softer period is over already as we expect more analyst downgrades at the tail end of the earnings season,” Klement said. “But we are optimistic that in September or October, we can see a re-acceleration of the market into year-end.”
SECTORS IN FOCUS:
- Italian banks as the government issued a clarification of its new tax on lenders’ windfall profits, saying the impact may be limited for some banks and the levy won’t exceed 0.1% of a firm’s assets.
For more on equity markets:
- Surprise Tax Sends Warning to Bank Investors: Taking Stock
- M&A Watch Europe: Rovio, Sega, Vodacom, Avax, Ahold Delhaize
- SPAC Woes Deepen as Major Sponsors Throw In Towel: ECM Watch
- US Stock Futures Unchanged; Doximity, Upstart Fall
- Regus Owner Counts on Hybrid Working Demand: The London Rush
You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance. To subscribe to a daily list of European analyst rating changes, click here.
--With assistance from Michael Msika.