Europe midday: Shares hold gains with eyes on ECB rate decision

European markets were up as investors look ahead to the European Central Bank’s interest rate decision on Thursday, widely expected to be a 25 basis point cut.

The pan-regional Stoxx 600 index was up 0.47% to 520.58 with all major markets higher. Germany's DAX was up 0.87% to 18,646, while France's CAC 40 was up 0.25% to 8,025. Spain's was up 0.65% to 11,396 after a sharp rebound in the country's manufacturing PMI.

Economists and traders widely expect a 25 basis point rate cut - the ECB's first since 2019.

It would also mark the first time the ECB has cut rates ahead of the US Federal Reserve although optimism around successive rate cuts has waned in recent weeks as persistent 'sticky' inflation in the eurozone has led to policymakers to make more hawkish comments on the future path of monetary easing.

In economic news, the contraction in manufacturing activity in the eurozone eased slightly less than expected in May, according to revised estimates on Monday by S&P Global and Hamburg Commercial Bank (HCOB), which signalled a "turning point" for the sector.

The final estimate for the eurozone manufacturing purchasing managers' index (PMI) showed a reading of 47.3 for last month.

While this was still firmly below the key 50-point level which separates expansion and contraction – a level not surpassed since June 2022 – this was up from 45.7 in April, though slightly below the preliminary estimate of 47.4 released two weeks ago.

Elsewhere, China's manufacturing sector grew in May at the fastest rate in two years, according to data released on Monday.

The Caixin/S&P Global manufacturing purchasing managers’ index rose to 51.7 from 51.4 in April, hitting its highest level since June 2022 and coming in ahead of consensus expectations of 51.5.

A reading above 50.0 signals expansion while a reading below indicates contraction.

On the equities front, GSK shares were down almost 10% on Monday after a US court ruled that jury trials could hear expert witnesses in 70,000 cases brought by cancer sufferers claiming its Zantac heartburn drug caused their condition.

Thule Group and St James's Place both led the risers with gains of more than 5%.

St Jame's Place was lifted by a JPMorgan Cazenove upgraded to ‘overweight’ from ‘neutral’.

JD Sports Fashion surged after results last week.

Reporting by Frank Prenesti for Sharecast.com