European shares edge up, Italy’s political crisis in focus

LONDON (Reuters) – European shares edged higher on Thursday, as investors waited for any signs of resolution of Italy’s political crisis and trade war concerns weighed on German automakers.

Milan’s bourse opened higher but trade was volatile, with the FTSE MIB .FTMIB index falling up to 0.4 percent before gaining 1 percent as shares in financials recovered.

Italy’s banking index .FTIT8300, which fell sharply in the first part of the week, extended yesterday’s gains with a 1.6 percent rise.

The pan-European STOXX 600 index was up 0.2 percent but Germany’s DAX .GDAXI was down 0.2 percent as car makers Volkswagen and (VOWG_p.DE) Daimler (DAIGn.DE) lost 1.1 and 0.8 percent respectively after a report President Trump wanted to block German luxury cars from the U.S. market.

Trade tensions between Europe and Washington are threatening to spill over as the latter prepares to announce plans for tariffs on EU steel and aluminum imports.

France’s Finance Minister said the EU would take “all necessary measures” to respond if Washington imposed tariffs, while the U.S. commerce secretary said any escalation of their dispute would depend on the bloc’s reaction.

FILE PHOTO: The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, March 20, 2018. REUTERS/Staff/Remote

“While events in Italy appear to be in pause, investors still have to contend with the looming deadline of the US tariffs waiver … as well as the ongoing negotiations with respect to NAFTA and China trade”, said Michael Hewson, chief market analyst at CMC Markets.

Inflation was also on investors’ mind ahead of the release of Euro zone numbers, after surprisingly high readings in Germany, France and Spain.

While some analysts argue stronger than expected inflation could strengthen the euro by prompting the ECB to take a less dovish stance, others believe the bloc’s economic slowdown makes such a move unlikely.

CRH (CRH.I) posted the best performance of the STOXX 600, up close to 5 percent after the Irish building materials group announced it would streamline some European and American businesses by combining them, in a move to improve profit margins.

News that Italy’s Enel (ENEI.MI) outbid Spain’s Iberdrola (IBE.MC) with a 2 billion dollar bid for Brazilian grid operator Eletropaulo Metropolitana Eletricidade de Sao Paulo (ELPL3.SA) did not support the utilities’ share price. Enel and Iberdrola both lost 0.5 percent.

Reporting by Julien Ponthus, Editing by Kit Rees and John Stonestreet

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