Europe midday: Stocks jump as Italy signals flexibility on budget

In a radio interview, Italian deputy prime minister, Luigi di Maio, indicated he was open to a "slight" downward revision in Italy's public deficit target.

"The issue is not the conflict with the EU on a deficit of 2.4%, what's important is that not even a single person is kept out of the core measures," he said.

Meanwhile, according to Adnkronos, on Sunday, Italy's other deputy PM, Matteo Salvini, also signaled flexibility regarding the 2019 government deficit-to-GDP target of 2.4% which officials in Rome had proposed to Brussels.

Their remarks sent the yield on the benchmark 10-year Italian Treasury note down by 17 basis points to 3.24%, boosting Milan's FTSE Mibtel by 2.74% or 513.47 points to 19,228.86.

Gains elsewhere on the Continent were more modest, with Germany's Dax advancing 1.21% or 134.67 points to 11,327.36, while the Stoxx 600 was up 1.01% or 3.58 points to 357.56.

Within the latter, a sector index for lenders' shares was doing best, jumping 2.59% to 145.63.

Euro/dollar was up by 0.31% to 1.13664 alongside.

But not all analysts were convinced, with CMC Markets's Michael Hewson telling clients: "at the risk of being cynical, this could be the latest attempt by Deputy Prime Minister Salvini to keep a lid on yields in the Italian bond market as the government looks to get their contentious budget through the Italian parliament. Whatever the reasons Italian yields have dropped sharply to their lowest levels since the end of September.

"The softer tone also makes it harder for the European Commission to censor Italy too harshly if the government is able to show that it is keen to co-operate."

On a similar note, analysts at Rabobank told clients: "we continue to favour playing Italy from the short side. The first issue is that even if the budget deficit target is marginally lowered, the fact is that it is almost certain to still be missed on the basis of it being based on a growth forecast that is too high.

"In addition, it is difficult to square the circle of the government not being willing to water down any of its policies but still think it possible to lower the budget deficit target."

Government officials in Rome were expected to meet on Monday evening to discuss possible ammendments to the proposed budget for 2019.

In other economic news, the IFO institute's prestigious business climate index for Germany slipped from a reading of 102.9 for October to 102.0 in November (consensus: 102.3), dragged down by weaker 'expectations'.

Renault shares were moving higher even as its chairman was dismissed fromn the same post at Mitsubishi, in a move that some observers said would aid Nissan's plans to increase its influence in their alliance.

Greek lender Eurobank Ergasias was also in the headlines after disclosing its plans to sell roughly €7bn in troubled loans and to merge with real estate fund, Grivalia Properties REIC.