Europe close: Stocks gain ground despite uncertainty

European stocks reversed opening losses to trade higher in choppy markets, with investors continuing to mull over the impact of Brexit as it emerged who would be running for Prime Minister in the UK and the Bank of England dropped a heavy hint that it might ease policy further over the summer.

The benchmark Stoxx Europe 600 index jumped 1.04% and Germany’s DAX was up 0.71%, while France’s CAC 40 was 1.0% firmer.

Stocks in London also reversed course, with the FTSE 100 closing 1.57% higher as Justice Secretary Michael Gove and Home Secretary Theresa May announced that they would run for Prime Minister. However, former London mayor Boris Johnson said he would not be running.

The more domestically-focused FTSE 250 index was up 1.68%.

In a speech delivered on Thursday afternoon BoE Governor Mark Carney said Brexit constituted a major "regime change" but that the UK would recover.

The BoE would not hesitate to meet its responsibilities although uncertainty would remain high, he added.

In oil markets, West Texas Intermediate was down 2.32% at $48.75 a barrel and Brent crude was down 1.88% to $49.68.

In currency markets, the pound retreated 1.2% against the dollar to $1.3268.

On the corporate front, Deutsche Bank and Banco Santander were under the cosh after the Federal Reserve said late on Wednesday that they had failed US stress tests.

SABMiller traded a little lower but Anheuser-Busch InBev rallied after the Competition Tribunal of South Africa approved their combination with conditions. Meanwhile, AB InBev was to be investigated by the European Commission over whether it abused its dominant position in the Belgian beer market by hindering imports of its beer from neighbouring countries, in breach of EU antitrust rules.

Elsewhere, Legal & General nudged lower after saying it made £4bn of sales across bulk annuities, individual annuities and lifetime mortgages in the first half of the year.

Private equity firm 3i gained as it said it had no plans to dispose of its investment in Dutch discount retailer Action despite a number of approaches.

Data out earlier from Destatis showed German retail sales rose more than expected in May.

Retail sales were up 0.9% on the month versus expectations of a 0.7% increase and a 0.3% decline in April.

On the year, retail sales pushed up 2.6%, which was below economists’ expectations of a 3% rise and down from an upwardly revised 2.7% gain in April.

Other data showed German unemployment fell more than expected in June while the unemployment rate held steady at its lowest level since German reunification in June. The unemployment rate came in at 6.1% in June, in line with economists’ expectations.

Meanwhile, the number of unemployed people fell by a seasonally-adjusted 6,000 to 2.69m, versus estimates of a 5,000 decline.