Europe midday: Stocks rise on oil price recovery, dovish Fed minutes

European stocks rallied on Thursday as oil prices recovered and the Federal Reserve’s meeting minutes signalled an interest rate hike is a long way off.

At 1156 BST, Germany’s DAX edged up 1.27%, France’s CAC 40 gained 1.60%, Italy’s FTSE MIB climbed 0.92% and Spain’s IBEX 35 was 1.26% higher.

Oil prices rose after the American Petroleum Institute said on late Wednesday crude supplies fell 6.7 million barrels for the week ended 1 July, easing concerns about the global crude glut. The closely watched Energy Information Administration report is due at 1600 BST.

Brent crude jumped 1.11% to $49.35 per barrel and West Texas Intermediate increased 0.16% to $47.99 per barrel at 1137 BST.

Meanwhile, minutes of the Fed’s 14-15 June policy meeting on Wednesday showed most policymakers agreed to keep interest rates to a range between 0.25% and 0.5% following a weak May jobs report and uncertainty leading up to Britain’s 23 June European Union referendum.

“Equity markets are looking north again after bouncing from 4-day lows thanks to the latest Fed minutes being taken as confirmation that the US central bank is nowhere near being able to raise rates again this year; maybe not until well into 2017,” said Mike van Dulken, head of research at Accendo Markets. “And markets like the idea of lower rates for longer.”

The Bank of England is expected to cut interest rates at next Thursday's policy announcement in the wake of Brexit. Governor Mark Carney said further stimulus measures are likely to be put in place to cushion the blow that a vote to leave the EU could have on the economy.

“Following on from Mark Carney’s strong hint last week that rates will be cut this summer, financial markets are now pricing in a 78% chance that this will happen next Thursday,” said Ben Bettrell, senior economist at Hargreaves Lansdown.

“Initially August had looked more likely, but with economic data deteriorating and markets still nervous, it now looks probable the MPC will adjudge that immediate action is warranted.”

In the eurozone, the European Central Bank at 1230 BST releases its account of its June policy meeting when members decided to keep policy unchanged. Investors will be focusing on any remarks with regard to Brexit and any clues on future additional stimulus.

In economic data, German industrial production fell the most in 21 months in May amid a global economic slowdown and political uncertainty in Europe. Production fell 1.3% from the previous month when it increased a revised 0.5%, the Economy Ministry said. Economists had pencilled in zero growth. Year-on-year industrial production dropped 0.4%, compared to expectations for a 1.5% increase and the previous month’s 0.8% rise.

UK industrial production data for May was also better than expected. Output rose 1.4% in May compared with the same month last year, according to initial estimates from the Office for National Statistics, slowing from the revised 2.2% growth in April 2016 but ahead of forecasts for a steeper slowdown to 0.5%. On the month, industrial production fell 0.5% but was ahead of forecasts for a 1.0% fall.

Manufacturing production increased 1.7% year-on-year but fell 0.5% month-on-month in May, beating forecasts for a 0.6% rise and a 1.2% decline respectively.

UK house prices growth surprisingly accelerated to 1.3% in June versus the previous month, according to data from Halifax, though it cautioned that the underlying pace of house growth "may be easing".

The month-on-month rise in June, which was recorded before the UK voted to leave the EU, followed May's 0.9% increase and a dip of 0.8% in April. Analysts had expected a 0.3% increase in June.

"Despite the Halifax reporting a marked rise in house prices in June itself, we believe that the prospects for the housing market have deteriorated markedly following the Brexit vote," said Howard Archer at IHS Global Insight.

Still to come, US initial jobless claims at 1330 BST and the NIESR’s UK gross domestic product estimate at 1500 BST.

On the company front, banks recovered from the previous day’s plunge amid worries about Europe’s banking sector. Credit Suisse Group AG and Deutsche Bank were among the risers.

Asset managers Aberdeen Asset Management and Henderson also rebounded. Aberdeen had cut the value of its UK property fund by 17% while Henderson said it had temporarily suspended trading in its UK commercial property fund.

Marks & Spencer was in the red after reporting a like-for-like drop in clothing and home sales in the 13 weeks to 2 July while food sales fell 0.9%.

Danone shares jumped after saying it will acquire WhiteWave Foods in a deal that values the US organic foods producer at $12.5bn.

Sports Direct surged after saying total group revenue was up 2.5% to £2.9bn in the year to 24 April, with gross group margin improving 0.4% to 44.2%.