Europe midday: Stocks turn higher; UK politics in focus

European stocks reversed opening losses to trade higher in choppy markets, with investors continuing to mull over the impact of Brexit as it emerged who would be running for Prime Minister in the UK.

At midday, the benchmark Stoxx Europe 600 index and Germany’s DAX were up 0.3% higher , while France’s CAC 40 was 0.8% firmer.

Stocks in London also reversed course, with the FTSE 100 up 0.3% as Justice Secretary Michael Gove and Home Secretary Theresa May announced that they would run for Prime Minister. However, former London mayor Boris Johnson said he would not be running.

The more domestically-focused FTSE 250 index was up 0.1%.

IG market analyst Joshua Mahony said: “European stock indices are now up again after initial declines, as the volatility in the immediate wake of the Brexit vote continues to fade. We’ve had a two-day relief rally driven by hopes rise that central bankers will do what is needed to soothe the impact of Brexit.

“Still, there’s no doubt markets remain fragile, and that’s also reflected in a further rise in the Japanese yen and a drop in oil prices.”

In oil markets, West Texas Intermediate was down 0.9% at $49.44 a barrel and Brent crude was down 0.7% to $50.28.

In currency markets, the pound was 0.3% firmer against the dollar at $1.3478.

On the corporate front, Deutsche Bank and Banco Santander were under the cosh after the Federal Reserve said late on Wednesday that they had failed US stress tests.

SABMiller traded a little lower but Anheuser-Busch InBev rallied after the Competition Tribunal of South Africa approved their combination with conditions. Meanwhile, AB InBev was to be investigated by the European Commission over whether it abused its dominant position in the Belgian beer market by hindering imports of its beer from neighbouring countries, in breach of EU antitrust rules.

Elsewhere, Legal & General nudged lower after saying it made £4bn of sales across bulk annuities, individual annuities and lifetime mortgages in the first half of the year.

Private equity firm 3i gained as it said it had no plans to dispose of its investment in Dutch discount retailer Action despite a number of approaches.

Data out earlier from Destatis showed German retail sales rose more than expected in May.

Retail sales were up 0.9% on the month versus expectations of a 0.7% increase and a 0.3% decline in April.

On the year, retail sales pushed up 2.6%, which was below economists’ expectations of a 3% rise and down from an upwardly revised 2.7% gain in April.

Other data showed German unemployment fell more than expected in June while the unemployment rate held steady at its lowest level since German reunification in June. The unemployment rate came in at 6.1% in June, in line with economists’ expectations.

Meanwhile, the number of unemployed people fell by a seasonally-adjusted 6,000 to 2.69m, versus estimates of a 5,000 decline.

Still to come, US initial jobless claims are at 1330 BST and Chicago PMI is at 1445 BST.