Europe open: Stocks push higher; banks in focus after stress tests

European stocks rose in early trade as Friday’s weak reading on second-quarter US economic growth prompted investors to scale back their expectations of a rate cut by the Federal Reserve.

At 0845 BST, the benchmark Stoxx Europe 600 index was up 0.6%, Germany’s DAX was 1.1% higher and France’s CAC 40 was up 0.8%.

At the same time, oil prices were mixed. West Texas Intermediate was down 0.3% at $41.47 a barrel and Brent crude was flat at $43.53.

On Friday, the first release of US second-quarter gross domestic product showed an annual growth rate of 1.2% compared to 0.8% growth in the first quarter, missing expectations of a 2.6% increase. First-quarter growth was revised down from a previous estimate of 1.1%.

Accendo Markets’ Augustin Eden said: “Note that markets could well latch onto a combination of the fact it’s just the first estimate (not too much to worry about fundamentally) and the fact it also makes an imminent rate hike less likely (cheap money for longer). Therefore we could see US equities start the week on the front foot.”

On Monday, investors were digesting mixed data out of China, where the official manufacturing purchasing managers’ index for July fell to 49.9 from 50.0 the month before. A reading below 50 indicates a contraction. Economists had been expecting a reading of 50.1.

However, the private PMI survey by Caixin/Markit came in at 50.6 in July from 48.6 in June, beating expectations. Meanwhile, the official non-manufacturing PMI nudged up to 53.9 in July from 53.7 in June.

Bank stocks were in focus following the release of the European Banking Authority’s latest stress tests on Friday, with the Stoxx 600 sub-index for the sector up 1%.

Italy’s Monte dei Paschi was revealed to the best worst performer in the stress tests, with Barclays and Royal Bank of Scotland not faring very well, while UniCredit emerged as one of the best performers.

Elsewhere, Heineken was in the red after the brewer’s first-half sales growth missed analysts’ expectations.

French industrial gas company Air Liquide was also on the back foot after saying net profit in the first half fell 4.5% to €811m.

On the upside, Veolia gained ground as the water and waste utility posted a drop in first-half profit and said it was selling the stake in its transport unit.

GlaxoSmithKline edged higher after announcing a new agreement with Verily Life Sciences - formerly Google Life Sciences, an Alphabet company - to form Galvani Bioelectronics.

Burberry was flat after it said it has taken full control of its retail business in China.