Europe midday: Energy stocks pace the advance as oil prices rally

European stocks racked up solid gains on Friday as investors continued to take heart from signs the European Central Bank may implement further stimulus measures, with energy issues in the lead as oil prices rallied.

At midday, the benchmark Stoxx Europe 600 index was up 2.9%, France’s CAC was 3.2% higher and Germany’s DAX was up 2%.

Asian shares racked up healthy gains on Friday, with Japan’s Nikkei 225 closing up nearly 5.9%, China’s Shanghai Composite 1.3% higher and Hong Kong’s Hang Seng up 2.9%.

The positive tone was attributed to Draghi’s dovish words on Thursday and comments from Japanese Prime Minister Shinzo Abe’s aide, who said "conditions for additional easing have fallen into place.”

“European equities are trading higher this morning on the back of sharply-rebounding Asian markets overnight and in the aftermath of ECB chief Draghi's comments yesterday,” said Markus Huber, senior market analyst at Peregrine & Black.

“No doubt market reaction to Draghi's comments couldn't have been much different compared to the last ECB meeting back in December. However it needs to be seen if and for how long mere comments and at best potential prospects of further ECB action will manage to push concerns about the Chinese economy and global growth in general out of the limelight.”

Sentiment got a boost on Thursday after European Central Bank chief Mario Draghi hinted that further stimulus could be on the cards, saying the bank will "review and possibly reconsider" monetary policy at its meeting in March.

He said rates in the euro bloc would “stay at present or lower levels fro an extended period”, noting that the outlook for inflation had weakened significantly.

Cyclical stocks, whose performance is closely tied to the overall economy, were the standout gainers on Friday.

The Stoxx 600 oil and gas index surged 5.3% as oil prices rose above $30 a barrel, while the sub-index for basic resources rose 3.1%.

West Texas Intermediate gained 5.3% to $31.09 a barrel and Brent crude was up 6.6% at $31.17.

Meanwhile, on the data front, flash French, German and Eurozone manufacturing and services Purchasing Managers’ Indexes for January all fell short of expectations. However, as investors entertained the possibility of further ECB stimulus, the soft figures failed to put a damper on things.

Still to come on the macroeconomic calendar, US leading indicators are due at 1500 GMT, along with existing home sales. Before that, Markit’s manufacturing PMI is at 1445 GMT.

In corporate news, Philips slid after the Dutch electronics company said the $3.3bn deal to sell its components business to a consortium of Asian buyers broke down.

In London, Hammerson rallied after announcing an agreement to buy the new Grand Central shopping centre in Birmingham for £335m.