Europe midday: Shares rally after soft start; H&M soars on sales surge

European shares rallied at midday after a soft start, as investors mulled comments from central bankers on future interest rate policy to combat stubborn inflation.

The pan-European Stoxx 600 was up 0.32%, with regional bourses higher, bar the UK's FTSE 100, which was down by 0.19%.

European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Federal Reserve Chairman Jerome Powell all told a forum in Sintra, Portugal that they would not stop in the battle against rising prices, despite the potetial hit to growth.

Powell said there was “more restriction coming” and successive rate rises were not off the table. He also said there was a “significant possibility that there will be a downturn,” even if this was not the most likely scenario.

Lagarde also acknowledged the possibility of a euro zone recession this year, although it is not the ECB’s baseline case. She said a July increase was likely and that monetary policymakers “still have more ground to cover”.

‘’A more cautious mood has descended on financial markets as investors have been reminded that the interest rate hiking cycle is not yet at an end," said Hargreaves Lansdown analyst Susannah Streeter.

"European indices have opened in a lacklustre fashion, as worries still bubble about the effect of further hikes on economic growth with the threat of recessions reappearing on the horizon. A weaker oil price, with Brent crude falling back under $74 a barrel nudged energy stocks lower, with traders’ eyes fixed on the impact of higher interest rates on demand for the black stuff."

In equity news H&M shares surged 14% after the Swedish fashion retailer posted stronger-than-expected profits for the March to May period, and said third-quarter sales had also started well.

Shares in UK and French retailer B&M fell despite reporting higher first-quarter sales.

Serco shares jumped 11% after the outsourcer forecast annual revenues £200m higher than originally expected to at least £4.8bn.

Reporting by Frank Prenesti for Sharecast.com