Europe midday: Stocks push higher as M&A, oil prices lend support

European stocks pushed higher on Tuesday, shrugging of some weak readings on Chinese manufacturing as stronger oil prices and deal news helped to underpin the mood.

At midday, the benchmark Stoxx Europe 600 index was up 0.9%, Germany’s DAX was 1.7% firmer and France’s CAC 40 was up 0.8%.

West Texas Intermediate was up 1.6% to $34.30 as barrel while Brent crude was 0.8% firmer at $36.87. The Stoxx 600 oil and gas index rose 1.2%.

Stocks in Asia ended in the black despite softer-than-expected readings on China’s manufacturing sector as investors continued to cheer the People’s Bank of China’s cut to the reserve requirement ratio and amid stronger oil prices.

The Caixin Purchasing Managers Index fell to 49.0 in February from 49.4 the month before, missing consensus forecasts for an unchanged reading.

Meanwhile, the official manufacturing PMI from China's National Bureau of Statistics also disappointed, falling to 49.0 versus 49.4 the month before and forecasts for the same.

“Despite the poor numbers, the major indices across Asia managed to post some fairly solid gains, helping Europe to lift its positive start to the week and push the major European stock markets towards monthly highs. A solid oil price and a raft of M&A data have helped the stocks to push on,” said James Hughes, chief market analyst at GKFX.

Deal news provided a boost in Europe, with London Stock Exchange sharply higher after Intercontinental Exchange confirmed that it was considering making a bid for the UK exchange to rival Deutsche Boerse’s.

In addition, the Wall Street Journal reported on Tuesday that CME Group, which operates the Chicago Mercantile Exchange, was also mulling a takeover bid for LSE.

On the downside, Barclays slumped after announcing a drop in full year profit and a large cut to the dividend. For the year to 31 December, adjusted pre-tax profit slipped 2% to £5.4bn compared with analysts’ expectations for around £5.8bn.

Glencore slid after posting a 69% drop in net income for 2015 on the back of weaker commodity prices.

On the data front, there was some encouraging news on Eurozone unemployment.

Figures from Eurostat showed unemployment fell to 10.3% in January from 10.4% the month before, better than forecasts for it to remain the same and the lowest level since 2011.

“After two months of consecutive falls, Mario Draghi will be relieved to see employment data in the Eurozone improve, thanks largely to solid figures from Germany,” said Dennis de Jong, managing director at UFX.com.

"The ECB president won’t be getting carried away, however, as in the last week alone he has seen particularly poor inflation and confidence data. Wednesday’s producer price index numbers are also expected to follow suit.”

Data on manufacturing was less inspiring, however. Markit’s final Eurozone manufacturing PMI came in at 51.2 in February, up a touch from the flash estimate of 51, but weaker than January’s reading of 52.3.

This marked a 12-month low, although the index has remained above the neutral 50 mark for 32 successive months.

Still to come, Markit’s US manufacturing PMI is at 1445 GMT, while ISM manufacturing and construction spending figures for the US are at 1500 GMT.