European Stocks Boosts Amid Rome’s Tax Reversal

European stocks experienced a resurgence driven by a notable rise in Italian bank shares following Italy’s reconsideration of a portion of its windfall tax on financial institutions.

The FTSE MIB Index rebounded by 1.9%, recovering from a recent month-low drop, as Italy signaled that the impact of the tax adjustment might be less pronounced for certain banks, with the levy capped at 0.1% of a company’s assets. UniCredit SpA and Intesa Sanpaolo SpA emerged as prominent beneficiaries of the positive sentiment.

In a shift of focus, the benchmark Stoxx 600 climbed 0.9% as investors turned their attention toward forthcoming key US inflation data, particularly consequential following China’s report of declining consumer and producer prices. Meanwhile, ABN Amro Bank faced a decline due to a warning of higher anticipated costs for the next year. Conversely, Continental AG managed a 1.7% increase despite revising down its sales outlook, a move that financial experts noted had largely been anticipated within consensus expectations.

Despite a two-month consecutive uptick, European equities encountered a setback in August, attributed to concerns about persistently elevated interest rates, lackluster corporate earnings, and discouraging economic indicators from China. Market observers are eagerly awaiting the release of US consumer price inflation data on Thursday, which is anticipated to provide further insight into the Federal Reserve’s policy direction.

Joachim Klement, the Head of Strategy, Accounting, and Sustainability at Liberum Capital, pointed out that the current market pullback might motivate some investors to perceive value in the present trading levels. Klement expressed a cautiously optimistic outlook, suggesting a potential re-acceleration of the market later in the year, possibly in September or October, as conditions evolve.