Europe midday: Stocks push higher as oil gains, Deutsche Bank recovers

European stocks rose on Wednesday, boosted by stronger oil prices and decent gains in the banking sector as Deutsche Bank recovered from recent losses.

At midday, the benchmark Stoxx Europe 600 index was up 0.8%, while Germany’s DAX and France’s CAC 40 were both 1% higher.

Meanwhile, oil prices were firmer as investors kept an eye on the OPEC meeting in Algeria, with West Texas Intermediate up 0.7% to $44.99 a barrel and Brent crude up 1% to $46.43. Prices were underpinned by data from the American Petroleum Institute on Tuesday showing a surprise fall of 752,000 barrels to 506.4m in the week to 23 September.

A recovery in Deutsche Bank shares helped to underpin the tone following two days of heavy losses, after chief executive John Cryan reassured investors that the bank had not asked for state aid to help settle a $14bn fine from the US Department of Justice over the mis-selling of mortgage-backed securities.

The Stoxx 600 banks index was up 0.8%.

The recovery also came as the bank’s wholly-owned subsidiary Deutsche Holdings agreed to sell Abbey Life to Phoenix Group for £935m in cash.

IG’s Joshua Mahony said: “The resurgence of Deutsche Bank’s shares has gone a long way to restoring confidence in Europe, with fears of a banking meltdown easing for now. The bank is faced with a $14bn bill that is roughly the equivalent to the current €15bn market cap. With the government clearly unwilling to bail out the bank, it instead falls upon the firm to start negotiating down the bill and selling off assets, as we have already seen with today’s sale of Abbey Life insurance group to Phoenix Life.

“However, there is an argument to be had that the decision from US Department of Justice to completely destabilise the European banking system as retribution for Deutsche Bank’s role in the disruption of the US financial system is far from helpful. The size of the bill seems excessive at best and without the ability to negotiate down the amount, we could see one of the biggest banks in mainland Europe split up.”

Royal Bank of Scotland was in the black after it agreed to pay $1.1bn (£846) to settle two legal claims that it allegedly mis-sold mortgage securities in the run-up to the 2008 financial crisis.

Deutsche Post edged higher after announcing an agreement to buy integrated mail and parcel operator UK Mail Group for 440p per share, valuing the company at £242.7m. UK Mail surged 43% on the news.

TUI rallied after the travel firm upped its 2015/2016 profit guidance.

Investors were also digesting comments from European Central Bank chief Mario Draghi who said in a speech opening an ECB research conference that eurozone governments should implement growth-boosting overhauls to allow interest rates to rise safely above zero.

Draghi said: "We know that if interest rates are to rise safely away from the lower bound, we need structural reforms to raise potential output in the euro area and boost long-run interest rates.”

Later in the session, the focus will be on a testimony by Federal Reserve Chair Janet Yellen to the financial services committee on Capitol Hill at 1500 BST.

In addition, St Louis Fed President Jim Bullard is due to make opening remarks at the St Louis Fed’s conference on communication banking at 1510 BST.