Europe midday: Stocks push higher as oil prices recover; FOMC in focus

European stocks powered ahead, bouncing back from losses in the previous session as oil prices recovered, with investors looking to the start of the Federal Reserve’s two-day policy meeting.

At midday, the benchmark Stoxx Europe 600 index was up 1.9%, France’s CAC 40 was 2.3% higher and Germany’s DAX was up 2.2%.

Stocks fell heavily on Monday, with energy-related shares in particular under the cosh as oil prices skidded.

It was a brighter picture on Tuesday, however, with West Texas Intermediate up 1.4% to $36.81 a barrel and Brent crude 1.6% higher at $38.52.

Autos performed well as data from the European Automobile Manufacturers Association revealed a 13.7% increase in new car registrations in November, marking the 27th month of consecutive growth.

The Stoxx 600 autos and parts index was up 2.5%.

Despite the upbeat tone, some market participants were sceptical.

“Still it needs to be seen if the bottom of the current move is in place or if this is merely a ‘technical reaction’ due to highly oversold short-term market conditions with more downside to come,” said Markus Huber, senior analyst at Peregrine & Black.

Among individual stocks, BHP Billiton was a high riser after Credit Suisse upgraded the stock to ‘outperform’ from ‘neutral’.

Rio Tinto was also in the black after its Oyu Tolgoi expansion project received a boost when a syndicate of banks and international governments agreed $4.4bn (£2.9bn) in loans.

Shares in engineering software group Aveva tumbled after it announced that it had terminated takeover talks with Schneider Electric.

French pharmaceuticals company Sanofi rallied after announcing that it will swap some assets with Boehringer Ingelheim.

Faurecia was also on the front foot after the car parts group agreed to sell one of its division to Plastic Omnium.

Hennes & Mauritz edged higher despite posting weaker-than-expected November sales growth.

Swiss pesticide maker Syngenta AG was up following a report that China National Chemical Corp’s chairman Ren Jianxin met the company in Europe last week as the Chinese chemical firm looks to move ahead with a takeover plan.

On the downside, though, Dialog Semiconductor fell sharply after the German chip maker cuts its revenue guidance.

In macroeconomic news, data from the ZEW Center for European Economic Research in Mannheim showed German economic sentiment rose for the second consecutive month in December.

The headline ZEW expectations index rose to 16.1 in December from 10.4 the previous month, surpassing forecasts for a reading of 15.

The assessment of the current economic situation in Germany was largely unchanged, with the index nudging up 0.6 points to 55.0 points and beating expectations for a reading of 54.2.

Elsewhere, data from Eurostat showed employment growth in the euro bloc rose a seasonally-adjusted 0.3% in the third quarter, marking a slightly slowdown from 0.4% growth in the previous quarter.

On the year, employment rose 1.1% following a 1% increase.

Still to come on the data front, US CPI and Empire manufacturing are at 1330 GMT, while the NAHB housing market index is at 1500 GMT.

The big focus for the day is likely to be the US inflation data, which Societe Generale expects to show core inflation up to 2%.

“I can think of lots of reasons why that would be seen to justify a rate hike, and indeed several rate hikes,” said strategist Kit Juckes. “But I’m not sure the market will even pay much attention with eyes on oil prices, credit markets, and the Chinese renminbi.”