Europe midday: Stocks rise as oil prices ease; BoE keeps rates on hold

(Sharecast News) - European stocks were still in the black by midday on Thursday as oil prices eased, and as the Bank of England left rates unchanged as expected.

The benchmark Stoxx 600 and Germany's DAX were both up 0.6%, while France's CAC 40 was 0.4% higher. At the same time, Brent crude was down 1.8% at $103.93 a barrel and West Texas Intermediate was 2% lower at $100.41.

The Bank of England held interest rates at 3.75% for the sixth meeting in a row. The Monetary Policy Committee voted by a majority of 6-3 to keep rates on hold, with the three dissenters - Megan Greene, Catherine Mann and Huw Pill - favouring a 25 basis points hike.

The Bank said the six members who voted to keep rates unchanged were concerned about recent developments in a range of energy prices and their impact on holding CPI inflation above target for longer than had been previously expected.

"Domestic activity and tight financial conditions were restraining inflationary pressures, but the risk of second-round effects was growing in the absence of a lasting resolution of the conflict," it said. "Two members in this group (Swati Dhingra and Alan Taylor) acknowledged these risks, but placed particular weight on the role of slack in moderating inflation, evidence of restrained pass-through of costs to prices, and the restrictive level of Bank Rate, all of which would allow more time to observe further evidence."

Meanwhile, the three hawks in favour of a hike noted that the escalation and duration of the Middle East conflict continued to raise energy and food prices.

"Global factors such as AI supply constraints and El Niño would provide inflationary pressure as well. A projected surge in inflation would peak in early 2027, just as wage settlements were agreed," the BoE said. "A mitigating factor for second-round effects, slack in the labour market and economy, appeared to have peaked already given stronger GDP growth and indications of an expansion in employment. This increased the likelihood of meaningful second-round effects emerging. For these members, risk management was appropriate."

The BoE said the trio believed that a proactive increase in Bank Rate would help anchor inflation expectations.

Jake Finney, senior economist at PwC, said that by keeping rates on hold the BoE has chosen patience over haste.

"While the external backdrop has worsened, with energy prices rising sharply, the Bank has opted to wait for clearer evidence that it has fed into broader inflationary pressures," he said. "With oil prices now above $100 a barrel, we are approaching the most adverse of the three scenarios the Bank outlined in July, which its models suggested could require up to four rate hikes.

"The key question now is persistence: a prolonged period of high energy prices would increase the risk of broader inflation pressures and strengthen the case for further rate rises. But with the jobs market still fragile, the committee will want to move cautiously."

Investors were also digesting the Fed policy announcement overnight, which saw rates lifted by 25 basis points as expected to between 3.75% and 4.00%. This marked the first hike since 2023 and the decision was unanimously approved with a 12-0 vote.

In equity markets, French caterer Sodexo was boosted by an upgrade to 'overweight' from 'neutral' by JPMorgan, which said it sees "the set-up turning more constructive". The bank said Sodexo has started to price a turnaround and it sees scope for further upside as evidence of commercial momentum becomes more visible and delivery consistency improves.

"We see an approaching inflection, with FY 27 likely the first year to break the downtrend in new development, and the recent Meta award an important proof point, even if progress is unlikely to be linear," it said. At the same time, JPM said the stock still screens inexpensive on its numbers versus history and peers, leaving room for estimate upgrades and multiple re-rating.

On the downside, Germany's Bilfinger tumbled nearly 20% as it cut its 2026 outlook again.