Europe midday: Stocks edge higher as attention turns to Yellen

European stocks edged higher on Tuesday, supported by an upbeat reading on German investor confidence as investors kept an eye on any Brexit-related developments ahead of a testimony by Federal Reserve Chair Janet Yellen.

At midday, the benchmark Stoxx Europe 600 index was up 0.5%, France’s CAC 40 was 0.7% higher and Germany’s DAX was 0.6% firmer.

At the same time, oil prices retreated, with West Texas Intermediate down 1.1% at $48.84 a barrel and Brent crude down 1% to $50.13.

Stocks racked up strong gains on Monday as investors reacted to the latest referendum polls, which showed a swing in favour of the Remain camp.

On Tuesday, however, the polls were split down the middle, suggesting it was too close to call. An ORB poll for the Daily Telegraph put the Remain campaign in the lead by seven points, while a poll from YouGov for the Times gave the Leave camp a two-point lead.

As well as the UK referendum, investors were looking ahead to Fed chair Janet Yellen’s semi-annual congressional testimony at 1500 BST. She will also be speaking on Wednesday.

IG’s Chris Beauchamp said: “Janet Yellen’s appearance before Congress this afternoon is a handy reminder that, outside of the UK, the world carries on (and will do regardless of the vote). We could see some recalibration of positions if her testimony is even a smidgen more hawkish than recent pronouncements.”

The upbeat tone on Tuesday was underpinned by the latest survey from the ZEW Center for European Economic Research in Mannheim, which showed German investor confidence unexpectedly improved in June.

The current situation index rose 1.4 points to 54.5, beating expectations of a reading of 53.0. Meanwhile, the indicator of economic sentiment improved 12.8 points from the previous month to 19.2, smashing expectations of 5.0.

The indicator of economic sentiment for the Eurozone, meanwhile, was up 3.4 points to a reading of 20.2. Economists had expected a reading of 15.3.

Investors also digested news that Germany’s Constitutional Court had cleared the European Central Bank’s emergency bond-buying scheme.

Launched at the height of the Eurozone debt crisis in 2012 as part of ECB President Mario Draghi’s commitment to do “whatever it takes” to preserve the euro, the Outright Monetary Transaction programme allowed the bank to buy the debt of financially-strained members, in secondary, sovereign bond markets.

In corporate news, Whitbread rallied after reporting an improvement in sales in the first quarter as its Costa coffee shops bounced back from a slowdown in the preceding few months.

BHP Billiton was a little lower after saying it was targeting another $600m in coal production costs by the end of the 2017 financial year.

Germany’s Kion Group was under the cosh after the supplier of forklift trucks and warehouse equipment said it was buying US logistics company Dematic Corp for around $2.1bn.