Europe midday: Shares rally after EZ GDP data; BoE holds rates

(Sharecast News) - European shares gained and oil prices remained elevated on Thursday as a surprise expansion in the eurozone economy boosted sentiment after US stock markets dropped sharply overnight amid Federal Reserve policymakers calling for tighter monetary policy.

The benchmark Stoxx 600 index was up 0.39% at 1145 BST with German, British, Italian and French bourses all rallying.

The euro zone economy grew faster than expected last quarter as increased investment in artificial intelligence and government spending offset high energy costs and the war in Iran.

GDP in the single currency bloc expanded by 0.4% compared with the previous three months and above forecasts of a 0.2% rise.

Sentiment was hit in the morning session by another escalation in the conflict between the US and Iran, with inflationary risks on the rise as oil prices jumped once again. After falling over the past three sessions, Brent gained a further 1.7% in morning trade on top of an 8% surge overnight to sit at $92.27, while WTI crude ticked up 0.70% on Wednesday's 7.5% jump to $85 a barrel.

US President Donald Trump told Fox News that the US planned to start hitting Iran "hard" in response to surprise attacks a day earlier. US Central Command confirmed that Islamic Revolutionary Guard Corps forces had launched "multiple ballistic missiles" on Tuesday in an attempted surprise attack on US troops in the Middle East, all of which were said to have been intercepted.

While the Federal Open Market Committee held on to rates as expected - the Fed Funds Rate range was maintained at between 3.5% and 3.75% - the central bank's chief Kevin Warsh said policymakers had a "good family fight" with three committee members voting to raise rates.

While Warsh refrained from giving explicit guidance about the future path of interest rates, "speculation about a hike will resurge in the coming weeks", according to analysts at Rabobank following the decision.

"We still think that the most likely outcome is that the Fed remains on hold through 2026. We expect the FOMC to talk extensively about the case for rate hikes, while ultimately refraining from taking action. However, the three dissents today indicate that the risk of a hike in the coming months has increased," Rabobank said.

Meanwhile the Bank of England kept interest rates unchanged, although three policy makers voted for a rise, indicating they were concerned about inflationary pressures feeding into the economy.

In equity news on another dump of corporate earnings, Mondi shares surged after half year results.

Clariant soared by 20% after a Dutch court on Wednesday dismissed a damage claim brought by Shell against the group and three other defendants related to alleged competition law infringement.

The Swiss chemical company said the ruling from the Amsterdam District Court confirmed its position that Shell suffered no harm because of Clariant.

Adidas and Rentokil both slumped after results.

Reporting by Frank Prenesti for Sharecast.com