Europe midday: Stocks nudge higher with OPEC, ECB in focus

European stocks nudged tentatively higher on Thursday as the OPEC meeting got underway in Vienna and ahead of the European Central Bank rate announcement.

At midday, the benchmark Stoxx Europe 600 index and Germany’s DAX were up 0.2%, while France’s CAC 40 was 0.1% firmer.

At the same time, oil prices were little changed as market participants eyed the meeting of the Organisation of the Petroleum Exporting Countries in Vienna. West Texas Intermediate was flat at $49.03 a barrel while Brent crude was 0.2% higher at $49.80.

Investors were also awaiting the release of US weekly crude inventories from the International Energy Agency at 1600 BST.

Mohammed Bin Saleh Al-Sada, Qatar's Minister of Energy and Industry and president of the OPEC conference told delegates at the start of the meeting that world demand remained “healthy” and the market now appeared to be rebalancing as the lower oil price led to a scaling back of production and exploration.

“From the supply perspective, in the first half of this year, we have seen a further downward revision to the 2016 outlook for non-OPEC supply. We now anticipate a contraction of 740,000 barrels per day this year. This is more than 2m barrels per day lower than the growth of 2015,” he said.

“This trend stems mainly from reduced cashflows, investment cutbacks and the deferral or cancellation of projects.”

“It is evident that these developments point to a more balanced market in the second half of this year, with demand for OPEC crude averaging around 32.5m barrels per day during this period. The overall demand increase year-on-year for OPEC crude is around 1.8m per day.”

Lee Wild, head of equity strategy at stockbroker Interactive Investor, said: “It's all eyes on Vienna Thursday. Both OPEC and the ECB meet in the Austrian capital, but neither is expected to announce market-moving news. It's highly unlikely the Saudis will convince Iran to accept a cartel-wide production ceiling. After years in the wilderness, Tehran is keen to grab market share.

“European policymakers, meanwhile, have enough on their plate implementing measures agreed in March.”

Societe Generale does not expect any policy action from the ECB, but said a “small, and rare” upward adjustment to the staff projections was likely.

Ahead of the announcement, data released by Eurostat showed producer prices in the Eurozone unexpectedly fell in April, highlighting the central bank’s struggle to bring consumer price inflation back to its target of close to 2%.

Producer prices were down 0.3% in April from March, marking the biggest drop in over six years. Economists had been expecting prices to be up 0.1% after a 0.3% increase the month before. On the year, producer prices were down 4.4%.

Energy sector prices fell 1.1%, while non-durable consumer goods prices were 0.1% lower.

Excluding the decline in energy prices, producer prices were up 0.1% in April compared to a 0.1% drop in March.

In corporate news, Johnson Matthey rallied after the specialty chemicals firm posted a drop in full-year profit that met analysts’ expectations and expressed confidence over the current year.

Austrian steelmaker Voestalpine racked up healthy gains as its full-year net profit came in ahead of analysts’ expectations.

The European Central Bank rate announcement is at 1245 BST, with the press conference at 1330 BST.

In the US, initial jobless claims are at 1330 BST. The ADP employment report at 1315 BST is likely to be watched more closely, however, as it’s generally considered a pre-cursor to the all-important non-farm payrolls on Friday.

If the payrolls report surprises to the upside, it could well underpin the argument for a US rate hike in a couple of weeks.