Europe midday: Banks pace the advance on ECB stimulus

At midday, the benchmark Stoxx Europe 600 index was up 2.2%, Germany’s DAX was 2.8% higher and France’s CAC 40 was 2.7% firmer.

Banks were the standout gainers, with the Stoxx 600 index for the sector up 4%.

At the same time, West Texas Intermediate was up 2.6% to $38.83 a barrel and Brent crude was 2% stronger at $40.84. The Stoxx 600 oil and gas index advanced 1.9%.

The International Energy Agency said in its monthly report there are signs oil prices “might have bottomed out” and there is now “light at the end of what has been a long dark tunnel”.

On Thursday, the European Central Bank slashed its main interest rate by 5 basis points to 0.00% and increased quantitative easing by €20bn to €80bn from April. Market participants had been expecting a €10bn increase.

In addition, the central bank cut the deposit facility rate by 10bps to -0.40% and lowered the margin lending facility rate to 0.25% from 0.30%.

Stocks flew higher on the news but soon reversed course as ECB chief Mario Draghi said in the press conference that policymakers were concerned that pushing rates too low could impact balance sheets, pouring cold water over prospects for further rate cuts.

“After initially surging on the yesterday's ECB headlines they subsequently sold off hard on Draghi's 'no more rate cuts' comment (how very short-sighted),” said Mike van Dulken, head of research at Accendo markets.

“They have since recovered after realising that Super Mario still delivered more than markets were anticipating (more QE, wider QE, more rate cuts, attractive LTROs) and, more importantly, is a man of his word, prepared to do 'whatever it takes'. So we may well be trading down for the week, but we are well off the lows (in some cases back just shy of highs) and with some bold central bank action safely banked.”

In corporate news, Deutsche Bank was on the front foot despite warning that of a challenging first quarter.

London-listed pub chain JD Wetherspoon was also in the black after reporting a 6.2% increase in first half revenues but a drop in profit.

On the downside, Old Mutual slid after the financial services company said it was splitting up into four main businesses and posted a 5% increase in 2015 profit.

Still to come on the data front, the US import price index is at 1330 GMT.