LONDON, SYDNEY :Global stocks rose on Wednesday and European equities outperformed as Italy soothed market nerves with the news that a windfall tax on bank profits would be less punishing than analysts had expected.

MSCI’s broad index of global shares was 0.2 per cent higher in early European trade. Europe’s regional Stoxx 600 share index rose 0.9 per cent, with bank stocks around 1.6 per cent higher. Italy’s FTSE MIB share index gained 1.6 per cent.

The Italian government shocked markets earlier this week with an announcement of a levy on banks’ record profits from sharply higher interest rates, sending European banking shares down 3.5 per cent.

Italy said overnight, however, that the new tax would not amount to more than 0.1 per cent of banks’ assets, reassuring analysts and investors who had expected the tax proceeds to amount to as much as 0.5 per cent of asset bases.

The fact the tax will be lower than expected “should improve market sentiment,” Deutsche Bank strategist Jim Reid said. But he also cautioned that “the burden-sharing of the costs and benefits from higher rates has a habit of becoming a political issue.”

In the U.S., stock markets were on track to steady after losses in the previous session caused by jitters over the domestic banking sector.

Futures tracking the S&P 500 share index climbed 0.3 per cent while Nasdaq futures rose by the same amount, following a broad Wall Street sell-off on Tuesday after the downgrade of several lenders by Moody’s.

In debt markets, Treasury yields were stable following solid interest for the $42 billion sale of three-year notes. Ten-year yields were flat at around 4.02 per cent, after falling 5 basis points overnight to as low as 3.98 per cent, a one-week trough.

The rates-sensitive two-year yield was steady at 4.758 per cent ahead of a key U.S. inflation report on Thursday. Economists expect headline inflation picked up slightly in July to an annual 3.3 per cent pace, while the core rate is seen unchanged at 4.8 per cent.

The U.S. dollar gave back some overnight gains to trade at 102.34 against a basket of currencies. China’s offshore yuan was up around 0.4 per cent against the dollar as selling of the U.S. currency by Chinese banks softened the blow of the country’s economy slipping into deflation.

China data on Wednesday showed consumer prices fell 0.3 per cent in July from a year ago, the first decline since February 2021, although it was slightly better than the forecast of a 0.4 per cent drop. Producer prices fell for a 10th consecutive month.

The data followed disappointing trade figures a day earlier that fuelled concerns about the outlook for the world’s second largest economy.

Elsewhere, oil prices were marginally higher. Brent crude futures rose 0.2 per cent to $86.36 per barrel and U.S. West Texas Intermediate crude futures added 0.3 per cent to $83.15.

The gold price was 0.3 per cent higher at $1,930.24 per ounce.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.2 per cent higher, following a 1.2 per cent tumble a day earlier. Japan’s Nikkei slipped 0.4 per cent.