Europe midday: Italian banks stage comeback after referendum losses

European stocks edged higher, with Italian equities bouncing back from losses in the previous session on the outcome of the constitutional referendum, with banks in particular regaining ground.

At midday, the benchmark Stoxx Europe 600 index was 0.46% higher, Germany’s DAX and France’s CAC 40 were up 0.44% and 0.57% respectively. Italy’s FTSE MIB was the standout performer, up 1.56%.

At the same time, the FTSE Italia All-Share Banks index extended earlier gains, rising 2.84%.

Spreadex financial analyst Connor Campbell said: “The region has been helped by the fact that soon-to-be-former Italian Prime Minister Mario Renzi has decided to stay on until after the country’s budget is passed in a few days, ensuring some semblance of stability as Italy undergoes its latest governmental shift. A potential Monte dei Paschi bailout this weekend has also helped calm the markets, making the referendum the most swiftly dealt with of 2016’s major political moments.”

Meanwhile, oil prices dipped slightly, with West Texas Intermediate down 0.7% to $51.42 per barrel and Brent crude 0.36% lower at $54.74.

On the data front, the final reading of eurozone economic growth in the third quarter was unexpectedly revised higher on Tuesday, boosted by household and public sector spending.

Eurostat raised its estimate on gross domestic product to year-on-year growth of 1.7% from a previous 1.6%. Second quarter growth was also revised higher by one tenth of a percentage point to 1.7%. Quarter-on-quarter GDP was confirmed at a 0.3% rise.

Xtrade Chief market analyst Paul Sirani said: “The minor upward revision of year-on-year growth in the eurozone is unlikely to be enough to halt the case for further monetary easing. With the uncertainty caused by Brexit and Italy wavering over its membership of the single currency, ECB President Mario Draghi faces an increasingly tricky task. Extending rather than tapering the QE programme looks likely at this stage.

"It’s not all doom and gloom, though, with German factory orders rocketing in October. Any positive signs coming out of Europe’s powerhouse could detract from the bleak outlook for the region and help the euro hold its own.”

Figures from Destatis showed German manufacturing orders rose 4.9% in October adjusted for seasonal swings and calendar effects, beating expectations for a 0.7% increase.

Domestic orders were up 6.3% and foreign orders were 3.9% ahead of the previous month.

In currency markets, the euro was flat against the dollar at 1.0762 as investors shrugged off the 'no' result from the Italian referendum.

FXTM Research analyst Lukman Otunuga said: “The mounting fears of political instability in Europe, uncertainty over the Italian economy and fears of Italy leaving the eurozone were pushed to the side with risk-on propelling the euro higher.”

On the corporate front, HSBC rallied as Morgan Stanley upgraded the stock to ‘equalweight’ from ‘underweight’.

Pharmaceutical giant Astrazenca edged higher as it announced that data from a Phase III trial of Tagrisso has shown the medicine is superior to standard chemotherapy for the treatment of lung cancer.

Plumbing and heating products distributor Wolseley fell as it reported a rise in first-quarter revenue, including increased revenue from the US, but said markets in the UK and the Nordic region were challenging.

Low-cost carrier EasyJet flew lower as it posted its passenger statistics for November, with total passengers for the month improving 2.9% to 4,947,060 year-on-year, although the load factor dropped 0.6 percentage points to 89.7%.

Industrial equipment rental company Ashtead was levelled off earlier gains as it said rental revenue in the six months to 31 October grew 13% on last year to £1.45bn, pre-tax profit was up 9% to £425.9m and the interim dividend was hoisted 19% to 4.75p per share.

Power generation firm Drax surged after announcing a conditional agreement to buy Opus Energy for £340m and an agreement to acquire four open cycle gas turbine (OCGT) development projects for electricity generation, as it said full-year earnings were still likely to be at the bottom end of market forecasts.

Shares in spreadbetting firms IG, CMC Markets and Plus500 tumbled as the Financial Conduct Authority announced plans to tighten rules around contract for difference products.

Still to come, US trade balance and non-farm productivity are at 1330 GMT, while factory orders and durable goods orders are at 1500 GMT.