Europe midday: Stocks fall, oil rises on Middle East uncertainty

(Sharecast News) - European stock markets were trading at their lowest levels in six weeks on Thursday as oil prices continued to rise on the back of rising geopolitical tensions in the Middle East, while investors digested a trio of central bank meetings.

After an initial surge past $78 a barrel on Friday, followed by a sharp drop on Monday, Brent crude has been creeping back higher over the past few sessions and stood just below $77 by midday CEST. This represents a 20% jump over the past month, closing in on levels not seen since January.

The Stoxx 600 was down 0.3% at 538.56 with all major indices across the continent in the red. The pan-European benchmark has now fallen in eight of the past nine sessions, dropping around 2.7% since 6 June.

"Equity markets were in the red across Europe and most of Asia as investors were spooked by the escalating conflict and the negative read-across to inflation," said Russ Mould, investment director at AJ Bell. "Oil prices have shot up in recent days and any disruptions to Middle East supplies could put them even higher and stoke inflation."

Central bank decisions

Central banks were back in focus in the aftermath of the Federal Reserve's latest policy decision on Wednesday evening. The Fed adopted a wait-and-see approach in regards to the impact of tariffs on inflation, with chair Jerome Powell admitting that policymakers were uncertain about what's around the corner.

Closer to home, the Swiss National Bank lowered interest rates on Thursday to zero from 0.25%, marking the sixth reduction in as many meetings as inflation continues to fall. "Inflationary pressure has decreased compared to the previous quarter. With today's easing of monetary policy, the SNB is countering the lower inflationary pressure," the SNB said.

Lastly, the Bank of England makes its own policy announcement at 1200 BST, though policymakers are largely expected to hold rates steady at 4.25%, with inflation still running well ahead of the 2% target.

Meanwhile, in other economic news, construction output across the eurozone rose at its fastest rate in more than two years in April, according to data out on Thursday from Eurostat. Construction output rose by 1.7% during the month of April, rebounding strongly after a 0.2% decline in March and a 0.6% drop in February.

Market movers

Banking stocks were mostly weaker as geopolitical uncertainty clouds the economic outlook, with Societe Generale, BNP Paribas, HSBC, Barclays and UBS all trading lower. However, German lenders Deutsche Bank and Commerzbank were bucking the trend to edge higher.

In London, Revolution Beauty was a heavy faller, after retail conglomerate Frasers Group officially walked away from the bidding process for the online cosmetics retailer, causing shares to drop 19%. Frasers had announced last week that it was conducting due diligence in regards to a possible offer. Frasers shares gained 1%.

Dutch recruiter Randstad and Swiss-French peer Adecco were among the worst performers on the Stoxx 600 on negative readacross from smaller industry player Hays after the British firm delivered a profit warning.