Italy boost, upbeat trade comments help European shares gain ground

(Reuters) - European shares rose after a weak open on Thursday, boosted by a rally in Italian shares, with positive comments from China on its trade talks with the United States helping sentiment.

China’s Commerce Ministry said both sides “should create conditions” for progress in negotiations and that China was against escalating the trade war and was willing to resolve the issue calmly.

“There seems to be some easing of trade worries that is giving a bit of boost to risky assets and stocks in particular,” said Simona Gambarini, markets economist at Capital Economics in London.

The gains in markets were largely broad-based and the benchmark index .STOXX, which was flat in early trading, rose 0.61% by 0755 GMT.

Italian stocks .FTMIB rose 1.33% to hit its highest level since Aug. 2 as President Sergio Mattarella is expected to give two former political enemies, the 5-Star Movement and Democratic Party (PD), a chance to form a new government on Thursday.

“The news is being welcomed because it’s certainly a better option than a League-led government,” said Gambarini.

“That said, the 5-star Movement and PD notoriously have not had much in common in the past and it remains to be seen whether the coalition will last.”

However, worries lingered in the markets.

The benchmark European index is on track to end August about 3% lower as an inversion in the U.S. Treasury yield curve showed investors were concerned about economic growth in the face of a trade war that is now in its second year.

Fears of a disorderly Brexit weighed on Britain's mid-cap index .FTMC, which slid for a second day in a row, after Prime Minister Boris Johnson decided to suspend Britain's parliament for more than a month before Brexit.

Johnson’s move also increases the chance of him facing a vote of no-confidence in his government, and possibly an election.

British IT group Micro Focus MCRO.L slumped 29.8% to trade at the bottom of the STOXX 600 after it warned on profit, citing lower spending by clients.

Bouygues BOUY.PA rose 4.9% after the French conglomerate reported a better-than-expected first-half core operating profit.

Reporting by Amy Caren Daniel & Sruthi Shankar in Bengaluru; Editing by Bernard Orr and Arun Koyyur