Europe midday: Stocks track strength in US, analysts more upbeat

Stocks on the Continent are bounding higher, tracking Wall Street's rebound back to its year-to-date highs, with traders referencing strong company earnings as the main driver behind share price gains.

In the words of Chris Beauchamp at IG: "it remains encouraging to see stock markets hold their ground despite a drumbeat of trade war headlines of late.

"Earnings season is shaping up very well indeed, which accounts for why US equities remain comfortably ahead of the likes of Europe, but a rising tide lifts all boats and will reinforce the impression that this economic recovery and its associated bull market has further to run. Reasons to be cautious still abound however [...]."

Just the day before, JP Morgan equity strategist Mislav Matejka had noted there were various opportunities for possible contrarian trades ahead, such as if trade fears didn't escalate or should the US dollar peak.

"Robust earnings, cleaner positioning (with US dollar shorts now cleared out) and Chinese policy easing," were countering uncertainty on trade, Matejka argued.

Nevertheless, it should be pointed out how Matejka preferred US stocks versus those from the euro area, due to "political risks" in the single currency bloc's periphery.

Against that backdrop, as of 1339 BST the benchmark Stoxx 600 was ahead by 0.66% or 2.57 points to 391.23, alongside an advance of 0.93% or 117.79 points to 12,715.17 for the German Dax and a gain of 0.85% or 46.73 points to 5,523.66 for the Cac-40.

Nevertheless, the year-to-date highs for the German Dax remained far away, at 13,599.60, although for its Parisian peer they were now coming into view, at 5,640.10.

Basic Resources were faring best within the Stoxx 600, with the Pan-European gauge's corresponding sector sub-index adding 2.41% or 10.93 points to 463.74.

To the delight of the White House perhaps, euro/dollar was ahead by 0.46% at 1.1605.

Front month Brent crude oil futures meanwhile were advancing another 1.245% to $74.73 a barrel on the ICE, a day after US sanctions were reimposed on Iran.

German industry was again in the spotlight on Tuesday, following the release of figures from the Ministry of Finance showing a 0.9% drop in industrial output month-on-month (consensus: -0.5%).

Production of motor vehicles and other transport equipment was the weakest link in the proverbial chain.

That prompted economists at Barclays Research to say that "This could be a first sign that concerns about trade war are holding activity back.

"[...] Notably, these negative effects materialised in the data, despite tight labour market conditions and anticipated fiscal stimulus."

Elsewhere, some market participants were also taking note of an article in the European Central Bank's most recent monthly bulletin according to which the recent pick-up in salary growth within th single currency bloc was likely signaling that higher inflation lay ahead.

In corporate news meanwhile, shares of Unicredit were up by nearly 3% on the heels of a better-than-expected report on second quarter earnings.