Italy leads European share bounce, with Fiat-Renault talks on tap

Milan's FTSE MIB index rebounds after big losses as economists look to Fed's Jackson Hole meeting in US for key signals.

    Italy's economic prospects have suffered due to political risk factors, but there may be reasons for optimism on the horizon [Stefano Rellandini/Reuters]
    Italy's economic prospects have suffered due to political risk factors, but there may be reasons for optimism on the horizon [Stefano Rellandini/Reuters]

    European stock markets ended at a two-week high on Wednesday, led by a rebound in Italian shares. Investors looked to more signs of stimulus from central bankers to allay fears of global economic slowdown.

    The pan-European STOXX 600 Index ended 1.2 percent higher with Italy's blue-chip index rising 1.8 percent, bouncing back from a political crisis-driven selloff.

    The resignation of Italian Prime Minister Giuseppe Conte on Tuesday made investors nervous about Rome's continuing lack of political stability but also signalled that a new coalition arrangement may be in works.

    Italy's main opposition party, the Democratic Party (PD), said on Wednesday that it was ready to hold talks with the anti-establishment Five Star Movement over forming a government following the collapse of the populist coalition.

    "The new majority would be considered a relatively more positive outcome for market sentiment, compared to snap elections," said ING analysts in a note explaining why forming a new government would be preferable to holding a fresh national vote.

    'A changing environment'

    On the corporate front, auto stocks got a boost from reported merger talks between Fiat Chrysler Automobiles NV - based in Amsterdam and London - and Renault SA, a car manufacturer in France.

    Italian newspaper Il Sole 24 Ore reported that talks between the Italian-American and French carmakers may be back on the table.

    A proposed multibillion-dollar merger that was set to create the world's third-largest auto company collapsed in June.

    The European auto sector has been hit by a global auto slowdown, with car sales plunging as the sector battles with the transition to electric and other alternative-fuel vehicles.

    "This is a great example of two companies getting together," said CMC Markets analyst David Madden, who added that "it's a continuation of a consolidation in the sector to survive in a changing environment".

    Among individual stocks, Pandora A/S shares rallied for a second straight session, up 16 percent, with Wednesday's move attributed by traders to a reported purchase of 24,400 shares by Chief Financial Officer Anders Boyer.

    Interest-rate sensitive banks made the smallest gains with lender-heavy Madrid stocks lagging behind regional peers.

    All eyes will be on the United States Federal Reserve's Jackson Hole symposium, which starts on Thursday and where investors hope central bankers - including Fed Chair Jerome Powell - will tread a dovish tone.

    Signs that governments and central banks are ready to step in with additional measures to boost cooling global growth have helped stock markets survive a volatile few weeks.

    However, Europe's STOXX 600 is still on course to end August lower.

    SOURCE: Reuters news agency