Europe midday: Stocks rebound as focus shifts to Fed

European stocks rose on Wednesday, recovering from the recent Brexit-driven losses as investors awaited the latest US rate announcement and comments from Federal Reserve Chair Janet Yellen.

At midday, the benchmark Stoxx Europe 600 index was up 1.2%, Germany’s DAX was 1% higher and France’s CAC 40 was 1.3% firmer.

At the same time, oil prices were in the red amid ongoing worries the UK might vote to leave the European Union at next week’s referendum and on supply glut fears. West Texas Intermediate was down 0.9% to $48.08 a barrel and Brent crude was 0.8% lower at $49.42.

Rebecca O’Keeffe, head of investment at Interactive Investor, said: “After a torrid few days for markets, European investors are bargain hunting, having concluded the market is oversold. Although this may prove to be a very astute move, with volatility and the possibility of negative news still high and the EU referendum genuinely too close to call, the upside potential for UK and European stocks is likely to remain limited until the result is known.

“Although the chances of a US rate rise today are being priced at 0%, Janet Yellen's statement remains highly relevant as investors try to work out whether the Federal Reserve committee believes the US economy is starting to slow down, or if the most recent jobs report suggests the US has effectively reached full employment? If the latter - and with the Federal Reserve's dual mandate focused on inflation and employment, interest rates could start to rise faster than the market is predicting.”

The Fed, which is widely expected to leave the funds rate unchanged at 0.50%, will present the latest projections and rate plots for the US economy after the rate announcement at 1900 BST.

On the corporate front, Swedish retailer Hennes & Mauritz was trading higher after reporting a 9% increase in sales in May.

Zara owner Inditex rallied after its first-quarter profit beat analysts’ expectations.

Shares in Zodiac Aerospace surged after its third-quarter sales exceeded forecasts.

In London, Poundland racked up solid gains after South African-based Steinhoff International confirmed it is considering a possible offer for the entire issued share capital of the company.

Property group Berkeley was under the cosh as it posted a decline in full-year profit, while information technology company Aveva tanked after ending takeover talks with France’s Schneider Electric.

In macroeconomic news, the latest figures from Eurostat showed the Eurozone trade surplus widened in April.

Exports were up 4.9% from March and imports increased 2.6%, meaning the trade surplus widened to a seasonally-adjusted €28bn from €23.7bn in March, which was above economists’ expectations of €21.5bn.

On the year, exports were down 1% and imports were up 5%, giving a surplus of €27.5bn in April, wider than the €20.9bn recorded in the same month last year.

Pantheon Macroeconomics said it was “a very strong headline, and much better than we expected”.

“Overall, we think net exports will boost Eurozone GDP growth in the second quarter as surging import prices—due to the recovery in oil prices—depresses real imports via the deflator.”