Europe midday: Stocks push up on Greek deal, rising oil prices
European stocks racked up healthy gains on Wednesday, underpinned by rising oil prices, Greece’s deal with creditors and a better-than-expected reading on German business confidence.
At midday, the benchmark Stoxx Europe 600 index was up 1%, Germany’s DAX was 1.3% higher and France’s CAC 40 was 0.9% stronger.
Meanwhile, Greece’s ASE index was up 0.6% after Athens agreed a deal to unlock €10.3bn in loans from its creditors in return for fiscal reforms.
Oil prices gained ground after data from the American Petroleum Institute showed US crude stocks fell by 5.1m barrels last week to 536.8m, which was a much bigger drop than expected.
West Texas Intermediate was up 1.1% to $49.17 a barrel and Brent crude was 1.3% firmer at $49.24.
“After three weeks of lacklustre market performance, investor sentiment has finally turned more positive, with markets up strongly, adding to the significant gains seen yesterday. The increased probability of a Remain vote alongside aid agreement on Greece (albeit somewhat diluted) and a more optimistic view of the US economy have all combined to encourage investors back to the table,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.
“The major fear over recent weeks has been about the possibility of Federal Reserve moves and what the impact of US rate rises might be. However, these fears appear to be receding as Fed speakers and underlying data confirm the US economy is improving and should therefore be able to withstand prospective rate rises. With many investors underinvested, the weight of additional liquidity could provide a boost for markets over the coming weeks.”
In corporate news, Marks & Spencer was firmly under the cosh after reporting a drop in full-year profit and warning that short-term profit would take a hit from plans to turn around the clothing business.
German chemical and pharmaceutical company Bayer was in focus after US agriculture giant Monsanto rejected the company’s bid, saying it was “financially inadequate”.
Royal Mail was higher after the postal regulator decided not to impose any new price controls on the company’s wholesale or retail products but kept the cap on stamp prices and proposed tightening some rules in the 'access' market.
Pharmaceutical company Novo Nordisk rallied after the US Food & Drug Administration recommended the approval of its new diabetes drug.
There was some good news on the data front, as a widely-followed survey showed German business confidence improved more than expected in May.
The IFO Institute’s business climate index rose to 107.7 from 106.7 in April, beating economists’ expectations for a reading of 10.68.
Meanwhile, the expectations index increased to 101.6 from 100.5, surpassing expectations of 100.8, while the index of current conditions pushed up to 114.2 from 113.2.
Pantheon Macroeconomics noted the improvement in sentiment was seen across all industries with the rebound in retail sentiment, and further upturn in construction confidence the stand-out details.
“Overall, the IFO indicates that the cyclical recovery is resilient to increased volatility in financial markets and subdued global growth, but it also indicates that growth will slow in Q2, following a sizzling Q1,” it said.