Europe midday: All eyes on Italy
European stocks took a breather - following big gains in the previous week - after moderate losses for Chinese assets overnight and ahead of the US central bank´s policy meeting later in the week.
Italy was also in focus after the President named PD-party foreign affairs minister Paolo Gentiloni as the new Prime Minister, charging him with the creation of a new government, whose main aim is expected to be the reform of the country´s Electoral Law.
"Italy will provide the necessary distraction before the Fed rate decision on Wednesday, butwith a 25bp rate increase in the US totally nailed on, markets may be excused for looking through the Fed and instead worrying about the recapitalisation of Italy’s banking system and the implications of the ECB’s QE revamp," strategists at SocGen said in a research note sent to clients.
As of 1151 GMT, the benchmark Stoxx 600 was off by 0.34% to 354.18, while the Dax was losing 0.18% to 11,183.58. Paris´s Cac-40 was drifting lower by 0.03% to 4,762.81 and the FTSE Mibtel was ahead by 1.15% to 18,512.90.
During the previous week, the Stoxx 600 had run up 4.72% - its best weekly tally since January 2015.
On Monday, China´s Shanghai Stock Exchange´s composite index lost 2.47% to 3,152.97, alongside a retreat in the yuan and in Chinese government bonds.
Traders cited poor liquidity ahead of the year-end as one factor behind the losses in China, together with remarks by US President-elect Donald Trump over the weekend, on Fox News Sunday, according to which his support for the decades-old 'One China' policy would hinge in part on being able to reach a better deal on trade.
Acting as a backdrop, the US Federal Reserve was expected to decide on 14 December on another 25 basis point interest rate hike, the second such increase since the last interest rate hike since ten-and-a-half years ago, before the Great Financial Crisis.
Over that time span, central banks around the world had lowered their main policy rates on 670 occassions, according to Deutsche Bank.
Italian assets on the other hand were benefitting from news that a new Prime Minister had been chosen.
Speculation was rife that a state bail-in for the country´s third largest lender, Banca Monte dei Paschi di Siena, would be forthcoming shortly, trigerring a rise of 7.54% in its shares.
However, on Sunday that Italian lender said it would to push ahead with an attempted private sector solution.
A bail-in of some of the bank´s debt holders, which would spare its smallest investors, might be legal under European Union rules, but would need to be approved by Brussels.
In parallel, Amundi SA, which was owned by Credit Agricole, said it would acquire UniCredit´s Pioneer Investments arm for roughly €3.5bn.
Royal Philips NV agreed to sell its lighting components business to Apollo Global Management for approximately $2.0bn.
In other corporate news, Allianz Renewable Energy announced it had bought a €330m portfolio of windparks from PNE Wind.
Deutsche Bank's asset management arm was planning to rejoin the group of the world´s top ten firms in that space, Welt am Sonntag cited division chief Nicolas Moreau as having said. Moreau did not comment on rumours about an upcoming flotation of the unit.
Stada received expressions of interest from Mylan and Novartis, SonntagsZeitung reported.
Oil prices shot higher after non-OPEC producers agreed to reduce their output by 568,000 barrels a day alongside the cut announced by the oil cartel itself on 30 November.
However, come midday front month Brent crude oil futures had pared some of their gains and were rising by just 3.99% to $56.57 a barrel on the ICE.
Adding to the buying pressure in crude oil futures, shortly after the announcement OPEC´s linchpin Saudi Arabia said it would lower its production by more than it committed to at OPEC´s last meeting.