MILAN (Reuters) - European shares rose for a third day running on Thursday as hopes over a compromise over Italy's contested budget and easing concerns over trade offset persistent uncertainty over Britain's exit from the European Union.
The euro zone STOXX index (STOXXE) rose 0.4 percent while the FTSE 100 (FTSE) lagged slightly behind, up 0.2 percent, after PM Theresa May saw off a leadership challenge but a mutiny by more than a third of her lawmakers indicated parliament was heading towards deadlock over Brexit.
The pan-European STOXX 600 benchmark (STOXX) was up 0.2 percent.
Italian stocks outperformed with the country's banks index (FTIT8300) up 3.2 percent after the government cut its deficit goal for 2019 with EU Commissioner Pierre Moscovici saying the bloc was having constructive talks with Rome.
Shares in Intesa Sanpaolo (MI:ISP), Italy's largest retail bank, were among the leading gainers in Europe, up 3.7 percent, while German lenders Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG) extended their rally on M&A chatter.
Plastic Omnium (PA:PLOF) advanced 10.1 percent after an upbeat update from the French plastic processing group, while G4S (L:GFS) soared 8.7 percent after the British security company said it was looking at a separation of its cash solutions business.
Top faller in Europe was Metro (DE:B4B), down 8.3 percent after the German wholesaler predicted a fall in profits due to its struggling Russia business.
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