Europe midday: Shares power ahead; Pound feels Brexit heat

European shares powered ahead at midday as they bounced back from last week’s US tech-stock sell-off and ignored threats the UK would walk away from Brexit trade talks without a deal.

The pan-European Stoxx 600 index rose 1.7% in morning trade as all major markets on the Continent made strong gains. Stock markets in the US remained closed for the Labor Day holiday, although index futures were trading.

“The mood on this side of the Atlantic is surprisingly upbeat given the rise in uncertainty surrounding the UK-EU trade talks, as the British are willing to walk away from the table from mid-October if a free trade agreement hasn’t been agreed upon," said CMC Markets analyst David Madden.

The pound fell after reports the UK was working on legislation to override parts of the Brexit withdrawal agreement.

In corporate news, shares in veterinary drugs maker Dechra led the risers after full-year profits beat expectations and the company increased its dividend.

House builders and suppliers were also in favour with Vistry and Travis Perkins also on the risers board as the latest survey from mortgage lender Halifax showed annual house price growth hit a new high in August thanks in part to pent-up demand following the Covid-19 lockdown.

House prices rose 5.2% on the year to £245,747, up from 3.8% growth in July and marking the strongest level of growth since late 2016. On the month, prices were up 1.6% following a 1.7% increase in July.

Halifax managing director Russell Galley said: "A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty."

Analysts were sceptical that the rise in prices could be sustained, however. Capital Economics said pent-up demand will soon be expended, while a weak economy, cautious lenders and the end of the stamp duty cut will weigh on prices. "We think house price growth will soon start to moderate, slowing to a standstill in 2021."

Shares in Italian payment firm Nexi were also higher on reports that its planned merger with smaller rival SIA could be back on.

The two companies have been looking at a tie-up to since early this year, but reports in July suggested talks had stalled over valuation issues.

SIA is controlled by Italian state lender CDP which is expected to be a key shareholder in any combined entity.

UK-listed payment processing company Network International was also in the green as the company said it expected to benefit from a cut in card transaction fees in the United Arab Emirates.