Europe midday: Stocks turn higher but Deutsche, RBS drop

European stocks reversed opening losses to trade a little firmer by midday as oil prices turned higher, but banks were in the spotlight as Deutsche Bank and RBS came under pressure.

The benchmark Stoxx Europe 600 index was up 0.1%, while Germany’s DAX was 0.4% higher and France’s CAC 40 was up 0.3%.

Oil prices perked up, with West Texas Intermediate 0.3% firmer at $49.94 a barrel and Brent crude up 0.5% at $52.20.

Meanwhile, the pound remained under pressure versus the dollar but off earlier lows, down 0.1% at $1.2425.

Oanda’s Craig Erlam said: “It’s been a slow start to the trading week, as a lack of news flow in Europe and Asia, combined with bank holidays in Japan, Canada and the US hit trading volumes.”

In corporate news, Deutsche Bank was under the cosh as investors were left disappointed that chief executive John Cryan did not strike a deal with US authorities over a $14bn fine for the mis-selling of mortgage-backed securities. Investors had been hopeful some good news would be announced as Cryan attended the International Monetary Fund and World Bank’s autumn meetings in Washington, raising hopes he might have been able to negotiate the fine.

The Financial Times reported on Monday that Deutsche Bank was given special treatment in the European bank stress tests carried out over the summer.

According to the FT, the lender, which has been using the results of the July stress tests as evidence of its healthy finances, was boosted by a special concession agreed by its supervisor, the European Central Bank.

Sticking with banks, Royal Bank of Scotland was also weaker amid reports of leaked documents showing it pushed smaller business customers to default on their debts so it could then buy the assets up on the cheap. RBS denied the reports and told the BBC a review had found no evidence that it had deliberately caused businesses to fail.

EasyJet flew lower again after Societe Generale downgraded the stock to ‘sell’ from ‘hold’ following the company’s profit warning last week.

German utility E.ON was in the red as it came under scrutiny again at the weekend for its Uniper spinoff.

On the upside, bookmaker William Hill rallied after confirming it was in merger talks with Toronto-listed Amaya Inc, owner of the PokerStars website, having rejected offers from smaller UK rivals in the summer.

Media conglomerate Vivendi was firmer after French billionaire Vincent Bollore upped his stake in the company to over 20%.

US stock markets are open on Monday but it’s the Columbus Day holiday so volumes are likely to be lighter than usual and the afternoon session could be fairly quiet.