Europe midday: Equity markets rise as oil and gas, resource stocks rally

European stocks racked up strong gains on Monday, led higher by oil and gas and basic resources as Friday’s disappointing non-farm payrolls pushed back expectations of a rate hike by the Federal Reserve.

At midday, the benchmark Stoxx Europe 600 index was up 2.3%, Germany’s DAX was 2.2% firmer and France’s CAC 40 was up 3.1%. The Stoxx 600 oil and gas index was up 4.2% while the corresponding index for resources was 3.6% higher as oil and metals prices rose.

“European markets have opened strongly as investor optimism grows that a US rate hike is off the table this year and commodity prices rise,” said Rebecca O’Keeffe, head of investment at Interactive Investor.

“Markets had been anticipating that the Federal Reserve would raise rates in December, but Friday's very weak employment numbers may have thwarted any chance of a 2015 rate rise. This has seen investor sentiment rally as bad US data is perceived as good news.”

On Friday, the payrolls report showed the US economy added 142,000 jobs in September, which was well below the 203,000 expected by economists.

Commodity trader Glencore pushed higher, tracking a surge in its Hong-Kong-listed shares, amid media reports of healthy interest in the company’s agricultural business. Singapore´s sovereign wealth fund, Japanese trading house Mitsui&Co. and a Canadian pension fund were among the parties who had expressed an interest in the unit, according to Bloomberg. Glencore put out a statement on Monday saying it was not aware of any reasons for the move in the HK-listed shares.

Sticking with resources, ArcelorMittal rallied after Citigroup upped the stock to ‘buy’ from ‘sell’, while Rio Tinto and Glencore also benefited from a bullish note by Societe Generale.

Swiss luxury group Compagnie Financiere Richemont rose sharply after it said the merger of its subsidiary, Net-A-Porter, with Yoox has been completed and will generate a one-off accounting gain of €610m to €670m.

Rolls-Royce was on the front foot after announcing plans to cut another 400 jobs in its marine business, on top of the 600 job cuts already announced in May.

Lloyds Banking Group was also in the black after the UK government said it will sell at least £2bn worth of shares in the bank to retail investors in spring 2016, as it looks to exit its shareholding

On the downside, K+S shares tumbled after peer Potash Corp announced on Sunday that it has withdrawn its proposal to negotiate a transaction with the company. Potash said that since it made the offer on 31 May, deteriorating market conditions and a lack of engagement by K+S management mean that continued pursuit of a combination is no longer in the best interests of its shareholders. Potash shares rallied on the news.

As investors bet that the Fed won’t raise rates this year, a batch of Eurozone data came and went with little fuss.

Figures from Markit showed the Eurozone economy continued to grow in September, although the rate of expansion eased to a four-month low.

The final Markit purchasing managers’ index composite output index fell from 54.3 to 53.6 in September, below the 'flash' estimate of 53.9 posted last month, as the average rate of expansion failed to pick up pace in the third quarter.

Meanwhile, figures released by Eurostat showed retail sales in the euro bloc were flat in August, compared with analysts’ expectations for a 0.1% decline month-on-month. July’s rate was revised up from 0.4% to 0.6%.

Finally, data released by German think tank Sentix showed investor confidence in the bloc fell to an eight-month low in October.