Europe open: Stocks gain as investors bet on Monte dei Paschi rescue

European stocks advanced in early trade, with banks in the black amid reports of a possible rescue for Italy’s Monte dei Paschi di Siena.

Sentiment was also underpinned by hopes that the European Central Bank will announce an extension of its bond-buying quantitative easing programme on Thursday, when it is due to make its latest rate announcement.

At 0850, the benchmark Stoxx Europe 600 index was up 0.7%, France’s CAC 40 was up 1.1% and Germany’s DAX was 1.2% firmer.

Meanwhile, oil prices retreated, with West Texas Intermediate down 0.8% to $50.55 and Brent crude down 0.7% at $53.57.

Shares in Banca Monte dei Paschi di Siena were up 7.2% after La Stampa reported that Italy could ask for a €15bn European Stability Mechanism loan to help not just Paschi but also some of the country’s other struggling banks.

The news boosted banks in Europe, with the Stoxx 600 sub-index for the sector up 1.3%.

Late on Tuesday, Reuters reported that Italy was preparing to take a €2bn controlling stake in Monte dei Paschi.

Sticking with banks, Credit Suisse rallied after announcing plans to cut costs further and downgrading its targets.

PostNL shares tumbled after it rejected the fourth and final offer made by Belgian peer Bpost, which valued the group at €2.7bn.

Train and bus operator Stagecoach was on the front foot after it hiked its interim dividend to show its confidence in the future and keep investors chipper as profits and earnings fell in the face of what it said was a continuing "challenging and uncertain" political and economic environment.

Accounting software company Sage pushed up as it confirmed that it is “evaluating potential strategic options” for the payments business in North America, including a sale, but stressed that there could be “no certainty” that the evaluation would lead to any action.

FTSE 250 provider of global mobile satellite communications Inmarsat gained after signing a contract with Air New Zealand to provide Global Xpress connectivity across the airline’s long-haul and short-haul fleets.

Miner Rio Tinto was a high riser as Credit Suisse upgraded the stock to ‘outperform’ from ‘neutral’.