Europe open: Stocks flat but Italian banks recover

European stocks kicked off Tuesday’s session in a muted fashion as investors continued to digest the outcome of the Italian referendum, with the country’s bank stocks clawing back some ground following heavy losses in the previous session.

At 0855 GMT, the benchmark Stoxx Europe 600 index, Germany’s DAX and France’s CAC 40 were all flat. Italy’s FTSE MIB was up 0.4%.

Meanwhile, oil prices were a little weaker, with West Texas Intermediate down 0.7% to $51.45 a barrel and Brent crude 0.4% lower at $54.70.

Banks in Italy were recovering from significant losses on Monday, with the FTSE Italia All-Share Banks index up 1.4%. Italian President Sergio Mattarella has accepted PM Renzi’s resignation but has asked him to stay on to oversee the 2017 budget at the end of this week.

Accendo Markets analysts Mike van Dulken and Henry Croft said: “A lacklustre European open comes in spite of a positive Asian session which echoes gains on Wall St. Advances by bigBank and commodity names are derived from relief at the absence of post-referendum turmoil in Europe (so far) coupled with a weaker USD giving a boost to metals prices and Brent crude oil, the latter testing $55 for the first time since July 2015.

“Italian Prime Minister Renzi has agreed to put off his resignation until the nation’s 2017 budget has been approved, reducing the risk of snap election and another populist backlash. Contagion fears also eased by suggestions of a weekend state bailout of Banca Monte dei Paschi di Siena due to concerns that a €5bn recapitalisation is at risk by the withdrawal of a key participant.”

Elsewhere, HSBC rallied as Morgan Stanley upgraded the stock to ‘equalweight’ from ‘underweight’.

Plumbing and heating products distributor Wolseley fell as it reported a rise in first-quarter revenue, including increased revenue from the US, but said markets in the UK and the Nordic region were challenging.

Low-cost carrier EasyJet flew lower as it posted its passenger statistics for November, with total passengers for the month improving 2.9% to 4,947,060 year-on-year, although the load factor dropped 0.6 percentage points to 89.7%.

Industrial equipment rental company Ashtead was on the front foot as it said rental revenue in the six months to 31 October grew 13% on last year to £1.45bn, pre-tax profit was up 9% to £425.9m and the interim dividend was hoisted 19% to 4.75p per share.

Power generation firm Drax surged after announcing a conditional agreement to buy Opus Energy for £340m and an agreement to acquire four open cycle gas turbine (OCGT) development projects for electricity generation, as it said full-year earnings were still likely to be at the bottom end of market forecasts.

Shares in spreadbetting firms IG, CMC Markets and Plus500 tumbled as the Financial Conduct Authority announced plans to tighten rules around contract for difference products.

On the data front, figures from Destatis showed German manufacturing orders rose 4.9% in October adjusted for seasonal swings and calendar effects, beating expectations for a 0.7% increase.

Domestic orders were up 6.3% and foreign orders were 3.9% ahead of the previous month.

Pantheon Macroeconomics said: “This is an astonishing headline, which suggests that German manufacturing is set to surge in Q4. We suspect the month-to-month headline will be revised down, though. If not, the mean-reversion next month likely will be grim.”

Still to come, the final release of third-quarter eurozone gross domestic product is at 1000 GMT. In the US, trade balance and non-farm productivity are at 1330 GMT, while factory orders and durable goods orders are at 1500 GMT.