Global stock markets rebounded Tuesday from the previous day’s selloff, with Wall Street boosted by earnings optimism and Europe holding up despite headwinds from Brexit talks and Italy’s budget.
London, however, underperformed after the EU published contingency plans for a ‘no-deal’ Brexit, piling pressure on Britain as Prime Minister Theresa May scrambles to unite her government behind an agreement.
European ‘stock markets are higher… as sentiment is slightly more optimistic despite the political risks’, said David Madden, market analyst at CMC Markets UK. 
Reports just after the London closing bell said that a Brexit deal had been agreed on a ‘technical level’ and would go before the British cabinet on Wednesday.
Oil prices slumped meanwhile after US President Donald Trump urged producing nations not to cut output.
Equities on both sides of the Atlantic had tumbled Monday, with Frankfurt shedding nearly two percent amid concerns over Tuesday’s EU deadline for Rome to revise its 2019 budget, and the Dow losing more than two percent as doubts were raised over Apple iPhone sales.
But Tuesday, the mood was more chipper, as positive earnings guidance from US retail company Home Depot lifted sentiment in New York trading and Nasdaq-listed Apple rebounded.
There was also talk of resumed trade talks between the US and China which ‘may help ease some of the sting of festering trade concerns’, said analysts at Charles Schwab.
‘On edge’ over Italy
In foreign exchange, the euro recovered from a 17-month low of $1.1216 seen at the start of the week.
Earlier in Asia, shares in technology firms slid, tracking a deep sell-off Monday in New York after Apple was hammered, while energy firms also fell with oil prices.
Back in Europe, Britain reported a pick-up in wage growth, boosting the pound and offsetting news of a slight increase in unemployment.
Italy’s populist government was set Tuesday to defy the European Commission, preferring to risk financial sanctions than revise a big-spending budget, and putting stock traders ‘on edge’, Madden said.
The coalition had been given time to change its 2019 plans but insists an anti-austerity approach will help kickstart growth in the eurozone’s third largest economy, and consequently reduce the public debt and deficit.
But Brussels forecasts Italy’s deficit will reach 2.9 percent of Gross Domestic Product in 2019 and hit 3.1 percent in 2020 – breaching the EU’s 3.0 percent limit.
In the oil market, crude futures fell sharply Tuesday.
The commodity enjoyed a healthy rise Monday after Saudi Arabia called for a global output cut of one million barrels per day and unveiled plans to trim its own production by 500,000 barrels from December.
However, Trump later hit out at the announcement in a tweet calling for prices to go lower.
‘Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!’ he wrote.
OPEC on Tuesday trimmed its global oil demand growth forecasts for this year and next, as kingpin Saudi Arabia tries to cut output to bolster prices in a weakening market.
Crude has been torpedoed since hitting four-year highs last month as dealers fret about oversupply, weakening demand and worries about the impact of the China-US trade war.
Signs of a softer-than-expected impact from US sanctions on Iranian crude exports have also weighed on prices in recent weeks.
Key figures around 1640 GMT
London – FTSE 100: FLAT at 7,053.76 (close) 
Frankfurt – DAX 30: UP 1.3 percent at 11,472.22 (close) 
Paris – CAC 40: UP 0.9 percent at 5,101.85 (close)
EURO STOXX 50: UP 1.0 percent at 3,225.20 
New York – Dow: UP 0.2 percent at 25,429.64
Tokyo – Nikkei 225: DOWN 2.1 percent at 21,810.52 (close)
Hong Kong – Hang Seng: UP 0.6 percent at 25,792.87 (close)
Shanghai – Composite: UP 0.9 percent at 2,654.88 (close)
Euro/dollar: UP at $1.1284 from $1.1218 at 2200 GMT Friday
Pound/dollar: UP at $1.3024 from $1.2848
Dollar/yen: UP at 114.03 yen from 113.85 yen
Oil – Brent Crude: DOWN $3.11 at $67.01 per barrel
Oil – West Texas Intermediate: DOWN $2.70 at $57.23