Europe midday: Stocks rebound although concerns about French election persist

European stocks rebounded on Wednesday after experiencing their worst session in five months a day before on concerns about the French election and the snap election in the UK.

On Tuesday, the benchmark Stoxx Europe 600 fell 1.1%, its biggest fall since 2 November, mainly due to the drop in London-listed companies after Prime Minister Theresa May called an early election.

At midday, the Stoxx Europe 600 index was up 0.34% to 377.62, Germany’s DAX rose 0.2% to 12,024.70 and France’s CAC added 0.28% to 5,004.07.

Meanwhile, Brent crude rose 0.36% to $55.09 per barrel and West Texas Intermediate was up 0.3% to $52.57.

The selloff on Tuesday was also due to concerns about the French presidential election ahead of the first round of voting on Sunday, with the spread between French and German 10-year bonds hitting a seven-week high.

Frontrunners centrist Emmanuel Macron and far-right Marine Le Pen are expected to make the run-off on 7 May, but far-left Jean-Luc Mélenchon and Conservative François Fillon are gaining ground quickly in a tight run race.

Chris Beauchamp, chief market analyst at IG, said: “Both Le Pen and Mélenchon want to put France’s euro membership to a popular vote, and both are opponents of the EU project, at least in its current form. A possible French exit from the single currency, and potentially even the EU, will likely destabilise markets, at least in the short term.

“The lesson of Brexit and of Trump is that we should not get too apocalyptic in our predictions. Even if one of these two ‘fringe’ candidates were to win, it would be difficult for them to put their manifestos into practice as complex constitutional changes cannot be enacted by presidential fiat.”

He said that either a Mélenchon or Le Pen victory would likely cause tremors across financial markets, as the euro would face a downward move against the dollar, as investors buy the greenback and treasuries as a safe haven move against volatility. Eurozone stock markets, which often receive a boost from a falling currency, may instead suffer as money moves to the UK or US.

The euro was flat versus the dollar at 1.0728 and unchanged against the pound at 0.83566.

Investors wee also eyeing speeches by European Central Bank officials later. Benoît Cœuré, a member of the ECB’s executive board, is to address the US council on foreign relations at 1400 BST, followed by chief economist Peter Praet at 1630 BST.

On the data front, the eurozone’s trade surplus rose to €19.2bn in February from €15.7bn in January, above the €18bn consensus forecast.

The group of 19 countries exported goods worth €170.3bn to outside the currency area and imported goods worth €152.6bn. Exports rose 0.4% from January and imports fell 1.7%.

In corporate news, Associated British Foods was up 1.51% after it lifted its dividend and said profits surged in the first half of the year as the sugar business benefited from higher prices.

Burberry fell 5.29% after the luxury fashion brand posted a drop in underlying revenue in the second half as an "exceptional" performance in the UK was offset by efforts to improve brand positioning in the US and in the beauty business.

Carmaker Volkswagen gained 2.58% after data showed that car registrations in Germany increased 11.4% in March.

L'Oreal rose 1% after the beauty company reported better than expected growth in first quarter like-for-like sales due to strong demand in Asia and North America.

Heineken added 1.35% after the Dutch brewer reported an 11% rise in first quarter profit and beat revenue expectations.