European stocks gained and Italian banks recouped some of Tuesday’s losses as investors weighed Rome’s backtracking on part of its windfall tax on lenders.
(Bloomberg) — European stocks gained and Italian banks recouped some of Tuesday’s losses as investors weighed Rome’s backtracking on part of its windfall tax on lenders.
The FTSE MIB Index rose 1.3% 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 that 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 0.4% by the close in London, with investor focus turning to key US inflation data due later in the week after China posted a drop in consumer and producer prices. Energy stocks rallied as oil climbed to its highest in almost nine months, while travel and leisure underperformed.
Among individual movers, Delivery Hero gained after the food delivery company demonstrated its path to profitability with a positive adjusted Ebitda in the first half. ABN Amro Bank dropped as it warned costs will be higher next year, while Continental AG fell even as it cut its sales outlook, with analysts saying the move was mostly priced into consensus expectations.
After the decline in euro-area bank dividend futures on Tuesday, analysts say that Italian government’s partial u-turn on plans for a new banking windfall tax will likely allow lenders to keep their promises on shareholder returns intact.
European equities have been under pressure in August after rallying for two months in a row as investors assess the possibility of higher-for-longer interest rates, gloomy 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 this month may prompt “some investors to see value emerge at current levels.”
“We doubt that the current softer period is over already as we expect more analyst downgrades at the tail end of the earnings season,” he added. “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.
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–With assistance from Michael Msika and Joel Leon.
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