Europe midday: Stocks in the black as basic resources rally

European stocks rallied, with basic resources pacing the advance, as the latest Federal Reserve minutes signalled that the US economy was strong enough to cope with a December rate hike.

“Markets are clearly liking the US central bank’s faith in the US economic recovery and belief in a gentle ‘testing of the water’ first move towards policy normalisation,” said Mike van Dulken, head of research at Accendo Markets.

At midday, the benchmark Stoxx Europe 600 index was up 1%, France’s CAC was 0.8% higher and Germany’s DAX was up 1.6%.

Minutes from the Federal Reserve’s October meeting – which took place before last month’s bumper nonfarm payrolls report – revealed that most members of the policy-setting committee expected economic conditions to be right for a December rate hike, although they insisted any tightening would be slow and gradual.

“The Federal Open Market Committee Minutes were billed as the biggest news event of the week,” said Societe Generale strategist Kit Juckes. “In the event, the Fed managed a rare feat - they left the market convinced that they will hike rates in December but equally convinced that it won't be a big deal.”

Sentiment was also lifted after the People’s Bank of China said it would cut interest rates for the Standing Lending Facility in a bid to boost liquidity in the financial system. It said the overnight rate will be cut to 2.75% and the seven-day rate to 3.25% as of Friday.

Overall, basic resources were the standout gainers, with the Stoxx 600 index for the sector up 2.5% as the dollar lost ground against its major rivals on rate hike expectations and as the Bank of Japan stood pat on policy.

In individual news, Johnson Matthey surged to the top of the FTSE 100 after the specialty chemicals firm posted a rise in first half pre-tax profit and revenue, and declared a special dividend.

Miner BHP Billiton was also on the front foot after it said that maintaining its balance sheet was a priority

French catering group Sodexo soared after saying it would cut costs further in order to combat a volatile global economy and posting an increase in full year profit.

German diversified industrial group Thyssenkrupp also advanced after it reported a 46% increase in full year net profit and lifted its dividend.

Minutes from the European Central Bank’s October meeting are due at 1230 GMT. In the US, initial jobless claims are at 1330 GMT, while leading indicators and the Philadelphia Fed manufacturing survey are at 1500 GMT.