Europe midday: Stocks reverse losses as banks advance, euro slips

European stocks reversed opening losses to trade higher, led by strength in the banking sector as investors continued to focus on the timing of the next Federal Reserve rate hike.

At midday, the benchmark Stoxx Europe 600 index was up 1.3%, Germany’s DAX was 1% higher and France’s CAC was up 1.4%.

At the same time, oil prices were in the red as the dollar gained some ground. West Texas Intermediate was down 0.3% to $47.95 a barrel and Brent crude was 0.4% lower at $48.16.

A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.

Banks racked up healthy gains, with the Stoxx 600 index for the sector up 1.8%.

“Equities have again gone positive after starting the day in the red,” said Augustin Eden at Accendo Markets.

“Confidence there may have stemmed from UBS Boss Axel Weber telling CNBC that a US rate hike would not be a bad thing (i.e. what's all the fuss about?), yet maintaining he didn't think it would move anyway until better signs of economic strength are evident.

“An upbeat tone looks to have temporarily stifled the hitherto negative pressures stemming from (mainly non-voting, remember) US Federal Reserve hawks, who've seemed pretty chuffed with the effect they've had on the markets over the past week or so.

A weaker euro also helped to lift equities in Europe, as sterling got a boost from a Telegraph poll suggesting support for Brexit was on the decline.

In corporate news, SEB rocketed after the French household equipment manufacturer announced the acquisition of Germany coffee machine maker WMF from KKR.

DIY retailer Kingfisher was a high riser after reporting a solid start to the year, with 6.2% like-for-like growth in B&Q and Screwfix stores in the UK and Ireland contributing to 3.6% group growth to £2.7bn.

Severn Trent was also in the black as it cut its dividend but posted a rise full-year profit.

Old Mutual edged up after confirming that it has received approaches from third parties to acquire its 66% stake in OM Asset Management.

On the downside, German speciality chemicals group Evonik was under the cosh after private equity firm CVC placed its shares at a discount.

Earlier, Destatis confirmed that German gross domestic product grew at 0.7% in the first quarter compared with 0.3% in the final quarter of last year.

It said positive contributions came mainly from domestic demand, which helped to offset weaker trade.

Elsewhere, the latest survey from the ZEW Center for European Economic Research in Mannheim showed German investor confidence unexpectedly deteriorated in May.

The indicator of economic sentiment declined 4.8 points from the previous month to 6.4, versus expectations for an increase to 12.0.

The current situation index, however, rose 5.4 points to 53.1, beating forecasts for a reading of 47.9.

The indicator of economic sentiment for the Eurozone, meanwhile, fell by 4.7 points I May to 16.8, undershooting expectations of 23.4.