Mubasher: Auto industry stocks led a recovery in European share markets on Wednesday, on the back of an Italian newspaper report on some progress in the merger talks between Fiat Chrysler Automobiles (FCA) and Renault in recent weeks, Renault reported.

Renault’s shares climbed by around 3%, while FCA’s stocks rose by 2%, after Italian newspaper Il Sole 24 Ore reported the previously scrapped deal could be back on the table.

The broader European STOXX 600 index edged up by 0.7% at 8:18 am GMT, with the car index SXAP rising by 1.6%.

The STOXX benchmark dropped by 3% for the month, led mainly by fears that a full-blown trade conflict between the US and China and the aftermath of the U’s departure from the European Union (EU) are sending some major economies into recession.

In Italy, FTSE MIB recovered from a drop in the prior session, gaining 1.4%, against a backdrop of worsening political crisis.

Italian Prime Minister Giuseppe Conte resigned on Tuesday, paving the road for a new coalition government, but worries were assuaged after League leader Matteo Salvini said he is willing to keep the current coalition government to approve a 2020 budget.

“The fact that Italy is looking into budget negotiations so that they can submit the budget on time is partly helping sentiment,” Rabobank quantitative analyst Bas Van Geffen was quoted by Reuters.

In the US, President Donald Trump said that he was weighing tax cuts, downplaying market concerns that the world’s biggest economy was heading for a recession.

“The main [impact] of Trump cutting taxes will be on US markets, but if the US does better, it is good for an export oriented country like the Netherlands and Germany and therefore for the rest of the Eurozone as well,” Van Geffen said.

While stock markets made it through volatile few months, helped by signals that the governments and central banks were preparing to take additional measures to stimulate a slowing economic growth, they were still on track to end August in red ink.