Europe midday: Stocks push higher but Spanish markets drop on political uncertainty

European stocks kicked off what is expected to be a fairly quiet week on the front foot, although Spanish markets bucked the trend following an inconclusive general election.

“European stocks are starting out the new trading week on a positive note, staging an early bounce despite heavy losses for the governing 'Popular Party' in the Spanish elections over the weekend,” said Markus Huber, senior analyst at Peregrine & Black.

“Besides positive 'seasonals' which favour markets going up during this time of the year news that the Chinese CIC (China Investment Corporation) is considering investing into German companies is giving stocks a major boost this morning.

“Overall sentiment is positive however it needs to be seen if markets can hold on to their gains especially with oil remaining weak which is likely to put US markets under pressure once again later in the day. Trading volume is expected to be on the light side, deteriorating further the closer we are getting to Christmas.”

At midday, the benchmark Stoxx Europe 600 index was up 0.5%, Germany’s DAX was 0.9% higher and France’s CAC 40 was up 0.6%.

It was a very different picture in Spain, however, with the IBEX 35 down 2.2% and the yield on the country’s 10-year government bond up 18% basis points as the nation faced political uncertainty. Although Spain’s ruling conservatives won the general election, they lost their parliamentary majority, which means they could struggle to form a coalition.

“Given the exceptional nature of the situation and the lack of coalition-building experience in Spanish politics, reaching an agreement is going to be a lengthy process. With parliament in recess until around mid-January probably, we do not expect a vote of investiture to be presented before late January,” said Societe Generale.

“Looking at recent examples in Spanish regions, an even longer process cannot be ruled out.”

Meanwhile, oil prices came off earlier lows, with West Texas Intermediate down 0.9% to $34.42 a barrel and Brent crude down 0.8% to $36.57.

In corporate news, ITV was a high riser in London following a press report over the weekend that Comcast’s TV and film arm NBCUniversal was considering an £11bn bid for the broadcaster.

Swedish telecom equipment maker Ericsson surged after settling a legal dispute with Apple over mobile-device patents.

Swiss pesticide maker Syngenta was also in the black following reports that China National Chemical Corp has raised its takeover offer for the company.

French supermarket operator Casino nudged a touch lower after it put out a statement hitting back at last week’s damning report by research firm Muddy Waters Research, which said it was “one of the most overvalued and misunderstood companies” it had ever come across.

On the macroeconomic front, data released earlier by Destatis showed German producer prices posted their sharpest annual drop in nearly six years in November.

Producer prices slipped 0.2% on the month and 2.5% compared with November last year.