Europe close: Italian stocks outperform on report of US offer of ‘help’

 European stocks finished the session higher, but off their best levels, with Italy outperforming following a report that US President Trump has offered to help fund its public debt next year.

The benchmark Stoxx Europe 600 index was up by 0.05% or 0.18 points at 383.56 and Germany’s DAX by 0.23% or 28.94 points to 12,394.52, while France’s CAC was 0.24% or 13.17 points firmer at 5,432.50.

Dragging on shares was a 0.77% jump in the euro’s value versus the US dollar to 1.16276 after the head of he US central bank said he saw no clear sign that inflation was accelerating above policymakers’ 2.0% target.

Italy’s FTSE MIB was the standout gainer, however, up 0.65% to 20,741.96 after Il Corriere della Sera reported that Trump told Italian Prime Minister Giuseppe Conte that he was ready to help the country fund its public debt next year.

The paper cited three unnamed Italian senior officials as saying that Trump made the offer during a meeting in Washington last month.

Monex Europe said: “If the US would start to buy Italian debt, this would drive down lending costs for the Italians, making their elevated public debt levels less of a pressing matter. It remains unclear however how the Don would go on about doing this, given the Federal Reserve remains independent and tasked with targeting inflation.”

Meanwhile, investors were looking ahead to a speech by Federal Reserve chairman Jerome Powell at the Jackson Hole symposium at 1500 BST. “Traders are probably on the edge of their seats wondering whether Powell will respond at all to the criticism from US President Trump towards US interest rate policy earlier in the week, but the most market-friendly way to respond to such comments would be to ignore them,” said FXTM analyst Jameel Ahmad.

“The Federal Reserve does remain set on raising US interest rates again next month, and there is no reason for the Fed to deter from this path. I personally doubt that he would acknowledge the comments made by President Trump during Jackson Hole.”

US-China trade relations were also still in focus as this week’s talks between the two countries yielded no breakthroughs, with both of them imposing 25% tariffs on $16n worth of each other’s goods, although the Chinese commerce ministry did say that discussions had been “constructive” and “candid”.

Chinese finance minister Liu Kun told Reuters that while China doesn’t want to engage in a trade war, it will “resolutely respond” to the “unreasonable measures” taken by the US.

IG analyst Chris Beauchamp said the absence of any progress on the trade talks is disappointing, “but then again the bar was set so low here that no one is really surprised”.

“Both sides seem determined to fight this one out for the time being.”

Figures released by Destatis earlier showed that real GDP in Germany increased 0.5%quarter-on-quarter over the three months to June, up a touch from a 0.4% rise in the first quarter and in line with both the initial estimate and consensus.

In corporate news, Irish building materials group Kingspan surged on the back of better-than-expected first-half profits, while Shire rallied as the US Food and Drug Administration approved a first-of-its-kind drug, Takhzyro, to treat patients aged 12 plus suffering from a rare hereditary disease that causes swelling.