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By Geoffrey Smith

Investing.com — Europe’s stock markets were again in the thrall of politics Wednesday, but this time they’re being driven sharply higher.

By 4:50 AM ET (0850 GMT), the benchmark was up 1.1%, its highest in over a month. The German was up 1.3%, back above 12,000 for the first time since Aug. 1, while France’s was up 1.2%.

The wave that lifted all boats was a report in the South China Morning Post saying that the embattled head of Hong Kong’s legislature, Carrie Lam, is about to withdraw a controversial bill that sparked what morphed into three months of protests against encroachments on citizens’ rights.

The news was a particular boon to luxury goods companies, which derive a disproportional amount of their revenues and profits from Hong Kong’s boutiques, and which cited the protests as hitting their performance in the last quarter. French-based Kering (PA:), the owner of Gucci, rose 3.7%, while LVMH (PA:) rose 3.4%. U.K.-listed Burberry (LON:) gained 3.6%, while Italy’s Moncler (MI:) and Salvatore Ferragamo (MI:) rose 3.5% and 2.7%, respectively. Switzerland’s Richemont (SIX:) rose 3.9%.

Asia-focused banks also stood out in London, with HSBC (LON:) rising 2.1% and Standard Chartered (LON:) rising 3.6%.

More localized support came from the U.K., where parliamentary opponents of a No Deal Brexit won a motion late on Tuesday to wrest control of the House of Commons agenda, effectively wrecking Prime Minister Boris Johnson’s tactics for extracting last-minute compromises from the EU on life after Brexit. The U.K. was one of the worst-performing indexes in Europe on Wednesday, as a 1.5% surge in hit the multinational components of the index, but still rose 0.8%.

The biggest outperformer was again Italy, where the 30 rose 1.6% after the members of the Five Star Movement voted to support a deal with the center-left Democratic Party to form a new government.

Even so, it may be too early to get the champagne out. The developments – all three of them positive at first glance – have their own shadows. There was no mention of whether Lam had sought or received Beijing’s blessing for her climbdown. That means the threat of more forceful intervention has not been banished.

Secondly, Prime Minister Johnson responded to his defeat by saying he wants a general election, which on the evidence of the past three years – and current opinion polls – is no guarantee of an end to the whole Brexit psychodrama.

Thirdly, the tensions between the members of Italy’s new coalition are so obvious and ingrained that it seems unlikely the government will last much longer than any other of its 70 predecessors since the Second World War.

However, those all seem like being problems for another day.

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