European stock markets rose Wednesday as the EU reached a deal with Italy over Rome’s disputed budget and implemented contingency plans for a no-deal Brexit.
Wall Street also posted gains approaching midday in New York, while Asian stocks closed mixed, with all eyes on the US Federal Reserve’s upcoming decision on interest rates.
The Fed is wading into a charged political atmosphere, with another interest rate hike likely but probably accompanied by a strong hint that this will mark the end of monetary tightening for now.
The dollar slipped, while oil prices recovered somewhat a day after slumping to their lowest levels since late 2017 on concerns about a surplus of crude.
‘Christmas cheer’
‘Confirmation of a deal between Italy and EU instilled a modicum of Christmas cheer in the markets,’ noted Connor Campbell, analyst at Spreadex trading group.
The EU and Italy’s populist government on Wednesday called a truce in their bitter row over Rome’s disputed 2019 budget, as Brussels said revised spending plans fell within bloc rules.
In a first, the European Commission in October rejected Italy’s original budget, which promised a universal basic income and a pension increase for low-wage earners.
Brussels judged it would not produce the promised growth and only increase Italy’s already massive debt burden.
‘There were a lot of fears that the political spat could have triggered another round of the eurozone debt crisis, and those worries have since evaporated,’ said David Madden, a market analyst at CMC.
Meanwhile, the European Union adopted back-up plans to protect essential trade, transport and finance in the event that Britain leaves the bloc without a Brexit deal in just 100 days’ time.
‘Horribly wrong’
The European Commission said it was acting ‘to ensure that the necessary contingency measures can enter into application on 30 March 2019 in order to limit the most significant damage caused by a ‘no-deal’ scenario’.
The pound was down against the euro with pressure on sterling coming also from news of a drop in annual UK inflation.
‘As no-deal Brexit planning is being ramped up in both the UK and the EU, pound traders are increasingly nervous that this could actually all go horribly wrong,’ said Fiona Cincotta, a senior market analyst at Cityindex.
In a positive for London stocks, the weak pound gave the FTSE index a shot in the arm as it boosts the earnings of multinationals listed there.
On the corporate front, shares in GlaxoSmithKline surged after the UK pharmaceutical group said it and US peer Pfizer would merge their consumer healthcare units that produce over-the-counter medicines.
The tie-up of OTC brands including GSK’s Sensodyne toothpaste with Pfizer’s Centrum multi-vitamins paves the way for British group GSK to have two UK-listed companies, one specialised in the development of drugs and the other in consumer healthcare.
Meanwhile in Bucharest
In Tokyo, Japanese technology giant SoftBank celebrated the world’s second-biggest IPO for its mobile unit but the newly traded shares endured a torrid time in their debut session, plunging nearly 15 percent.
A spokesman for the firm confirmed it had raised around 2.65 trillion yen ($23.5 billion) via the unit’s IPO, making it Japan’s largest and the biggest globally since Chinese e-commerce giant Alibaba went public in 2014.
Back in Europe, the Bucharest stock market plunged more than 11 percent after the announcement of new Romanian taxes targeting banks and energy companies worried investors heading for the exits.
Faced with difficult choices to control its budget deficit, the country’s leftist government late Tuesday announced a series of tax amendments that are to kick in quickly, without prior consultations with businesses.
Local media immediately dubbed the stock exchange meltdown ‘Black Wednesday’, while the stock exchange said it was ‘worried’ by the new taxes which it said threatened the development of a domestic capital market.
Shares in the country’s leading banks and energy companies tumbled and tremors were also felt on the Vienna stock market where financials plunged in reaction.
Key figures around 1650 GMT
London – FTSE 100: UP 1.0 percent at 6,765.94 points (close)
Frankfurt – DAX 30: UP 0.2 percent at 10,766.21 (close)
Paris – CAC 40: UP 0.5 percent at 4,777.45 (close)
Milan- FTSE MIB: UP 1.7 percent at 18,961
EURO STOXX 50: UP 0.4 percent at 3,051.38
New York – Dow: UP 0.9 percent at 23,889.06
Tokyo – Nikkei 225: DOWN 0.6 percent at 20,987.92 (close)
Hong Kong – Hang Seng: UP 0.2 percent at 25,865.39 (close)
Shanghai – Composite: DOWN 1.1 percent at 2,549.56 (close)
Euro/dollar: UP at $1.1421 from $1.1365
Dollar/yen: DOWN at 112.22 yen from 112.51 yen 
Pound/dollar: UP at $1.2655 from $1.2641 at 2140 GMT
Oil – Brent Crude: UP $1.41 at $57.67 per barrel
Oil – West Texas Intermediate: UP $1.37 at $47.99