European stocks outperform as Italy soothes bank tax nerves By Reuters

By Naomi Rovnick and Stella Qiu

LONDON, SYDNEY (Reuters) -Global stocks rose on Wednesday and European equities outperformed as Italy soothed market nerves with the news that a windfall tax on bank profits would be less punishing than analysts had expected.

MSCI’s broad index of global shares was 0.2% higher in early European trade. Europe’s regional share index rose 0.9%, with bank stocks around 1.6% higher. Italy’s share index gained 1.6%.

The Italian government shocked markets earlier this week with an announcement of a levy on banks’ record profits from sharply higher interest rates, sending European banking shares down 3.5%.

Italy said overnight, however, that the new tax would not amount to more than 0.1% of banks’ assets, reassuring analysts and investors who had expected the tax proceeds to amount to as much as 0.5% of asset bases.

The fact the tax will be lower than expected “should improve market sentiment,” Deutsche Bank (ETR:) strategist Jim Reid said. But he also cautioned that “the burden-sharing of the costs and benefits from higher rates has a habit of becoming a political issue.”

In the U.S., stock markets were on track to steady after losses in the previous session caused by jitters over the domestic banking sector.

Futures tracking the share index climbed 0.3% while Nasdaq futures rose by the same amount, following a broad Wall Street sell-off on Tuesday after the downgrade of several lenders by Moody’s (NYSE:).

In debt markets, Treasury yields were stable following solid interest for the $42 billion sale of three-year notes. Ten-year yields were flat at around 4.02%, after falling 5 basis points overnight to as low as 3.98%, a one-week trough.

The rates-sensitive two-year yield was steady at 4.758% ahead of a key U.S. inflation report on Thursday. Economists expect headline inflation picked up slightly in July to an annual 3.3% pace, while the core rate is seen unchanged at 4.8%.

The U.S. dollar gave back some overnight gains to trade at 102.34 against a basket of currencies. China’s was up around 0.4% against the dollar as selling of the U.S. currency by Chinese banks softened the blow of the country’s economy slipping into deflation.

China data on Wednesday showed consumer prices fell 0.3% in July from a year ago, the first decline since February 2021, although it was slightly better than the forecast of a 0.4% drop. Producer prices fell for a 10th consecutive month.

The data followed disappointing trade figures a day earlier that fuelled concerns about the outlook for the world’s second largest economy.

Elsewhere, oil prices were marginally higher. futures rose 0.2% to $86.36 per barrel and U.S. West Texas Intermediate crude futures added 0.3% to $83.15.

The gold price was 0.3% higher at $1,930.24 per ounce.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.2% higher, following a 1.2% tumble a day earlier. slipped 0.4%.