Europe midday: Stocks reverse course as oil prices retreat

European stocks reversed earlier gains as oil prices turned lower and investors shifted their focus to the latest set of European Central Bank minutes.

At midday, the benchmark Stoxx Europe 600 index and France’s CAC 40 were down 0.2%, while Germany’s DAX was 0.1% lower.

At the same time, oil prices reversed course, with West Texas Intermediate down 0.1% to $37.71 a barrel and Brent crude down 0.1% to $39.81.

Prices were boosted data on Wednesday from the Energy Information Administration showed a surprise draw in US inventories. They fell by 4.9m barrels last week, versus expectations for a 3.3m increase.

However, they were back under pressure again after an official from the state-run South Oil Company in Iraq said exports from the country’s southern ports have risen to an average of 3.494m barrels per day in April from 3.286m in March.

Currency moves were also having an impact on markets, as the dollar hit a fresh low against the yen, sliding to its weakest level in nearly 18 months.

“The rally has gained momentum since the USD/JPY broke decisively below 110.0 yesterday and the euro is also sharply lower against the yen,” said SpreadCo analyst David Morrison.

“No doubt there was some disappointment that in a speech overnight BOJ governor Haruhiko Kuroda said nothing new about Japan’s economic outlook for monetary policy. But the real fear is that Japan’s policymakers are losing control of the situation and will be unable to counter the yen’s rally.”

Meanwhile, investors were also digesting the minutes from the Federal Reserve’s latest meeting, which came out after the European close on Wednesday and highlighted caution over future interest rate hikes.

The Fed minutes revealed that policymakers discussed the possibility of a rate hike in April but the overall consensus was that the risks from a global economic slowdown meant a cautious approach was needed.

Capital Economics said: “Although the minutes acknowledge that a few officials were ready to raise interest rates in April, many thought that the Fed should proceed more cautiously, in particular because of worries about global downside risks.

“At this stage, the chances of an April rate hike are very slim, but we expect the Fed will resume raising rates in June. By that time, fears surrounding global risks should have faded and further increases in core inflation will have convinced officials that the pick-up is in fact genuine. Thereafter, we expect the fed funds rate will end this year at between 1.00% and 1.25%.”

Thursday will see the European Central Bank release its latest minutes at 1230 BST, which will be scrutinised for any clues as to why it decided to implement the monetary policy measures it did in March.

“Even though it has been four weeks since the ECB announced its cocktail of rate cuts, additional asset purchases and ultra-cheap bank funding, it remains interesting to see how the discussion within the Governing Council evolved,” said Rabobank.

In corporate news, London-listed pharmaceutical company Shire was on the front foot after expressing confidence that its takeover of US-based Baxalta will proceed as planned even with new rules from the US Treasury to block ‘tax inversion’ deals.

Peers GlaxoSmithKline and AstraZeneca were also higher as investors bet they might become bid targets following the collapse of the Pfizer-Allergan deal.

Retailer Marks & Spencer was also in the black after it posted a mixed fourth quarter update that beat analysts’ expectations.

Payments processor Wirecard gained after reporting a 32% increase in full year profit, while telecoms company Numericable-SFR advanced after announcing a successful placing of senior secured notes.