Europe midday: Stocks push higher as oil prices rally

European stocks rose on Monday, with basic resources and energy issues pacing the advance as oil prices rallied.

At midday, the benchmark Stoxx Europe 600 was up 1.4%, Germany’s DAX was 1.9% higher and France’s CAC 40 was 1.7% firmer.

In London, the FTSE 100 was up 1.3%, but the pound experienced its biggest one-day drop against the dollar since 2010 as it emerged London Mayor Boris Johnson was backing the campaign for the UK to leave the European Union.

“Boris Johnson’s cleverly staged endorsement of the campaign to leave the United Kingdom grabbed headlines, and regardless of the London Mayor’s political motivations, this has had a sharp effect on sterling exchange rates. The implication is clear: while the Brexit referendum remains a live prospect, sterling is likely to be susceptible to these types of shocks, especially as the referendum date approaches,” said Ranko Berich, head of market analysis at Monex Europe.

Oil prices rallied, underpinned by a drop in the US rig count. Figures from the Baker Hughes rig count released on Friday showed the number fell by 26 to 413 last week, marking the lowest level since December 2009.

West Texas Intermediate was up 3.5% at $30.68 a barrel and Brent crude was 3.2% firmer at $34.07.

The Stoxx 600 oil and gas index rose 2.2% but basic resources were the standout gainers, with the sub-index for that sector up 3.9%.

“A rebound in oil prices and a rally in Asia, after a change in China's chief market regulator, has seen European markets rise in early trade as investors attempt to capitalise on the continued positive momentum and move back towards risk that has seen markets rally strongly over the past nine days,” said Rebecca O’Keeffe at Interactive Investor.

In corporate news, HSBC Holdings was under the cosh after the bank said pre-tax profit rose just 1% in 2015 and confirmed it was being investigated by US regulators over its hiring of people linked to Asian governments.

Associated British Foods was on the front foot after the Primark owner nudged up its full year earnings forecast.

Housebuilder Bovis Homes nudged higher after reporting a jump in full year pre-tax profit and revenue as legal completions and prices rose and the housebuilder sounded an upbeat note on 2016.

Home Retail shares surged following media reports over the weekend that Sainsbury’s could seek an extension to the Takeover Panel’s 18 March deadline, after South African retailer Steinhoff made an offer to the Argos owner. Sainsbury’s shares slumped.

On the data front, Markit’s flash Eurozone PMI composite output index for February came in at 52.7 compared with 53.6 the previous month.

This was below consensus expectations for a reading of 53.3 and marked a 13-month low.

The 'flash' Eurozone service PMI activity index fell to 53 in February from 53.6, also a 13-month low, and weaker than the 53.3 expected by analysts.

In parallel, the 'flash' manufacturing PMI for the region slipped to 51 from 52.3, which was lower than the 52 reading expected.

Still to come on the macroeconomic calendar, Markit's manufacturing PMI is due out in the US at 1445 GMT.