Europe midday: Stocks rebound despite Middle East tensions, but FTSE 100 falls

(Sharecast News) - European stock markets headed higher on Tuesday despite ongoing tensions in the Middle East, though weakness in London was limiting upside on the Stoxx 600 benchmark after a negative reaction to HSBC's latest results.

The Stoxx 600 was up 0.6% at 609.15 around the lunchtime mark, heading higher for just the second time in 11 sessions.

Indices in Frankfurt and Madrid were both up more than 1% each, while Milan's benchmark surged over 2% on the back of M&A activity in the banking sector, while Paris and Zurich registered moderates gains.

London's FTSE 100, however, was down over 1%, after being the only major index to be closed on Monday for a UK national holiday.

"The FTSE 100 is playing catchup to the pullback in stocks at the start of the week as the precarious ceasefire between Iran and US looked to be near collapse," said Neil Wilson, investor strategist at Saxo UK.

"With the UAE coming fresh attack from Iran and the US sinking some Iranian boats, the situation is heating up quick. That was enough to spike Brent and for stocks and bonds to move lower Monday as the Stoxx 600 declined 1% and yields ticked higher on inflation worries."

HSBC provides a drag

London's banking sector was weighing heavily on the FTSE 100 after HSBC posted a surprise fall in quarterly earnings despite a spike in net interest income. The bank saw revenues rise by an above-forecast 6% in the first quarter to $18.6bn, with net interest income 8% stronger at $8.9bn, but pre-tax profits fell to $9.4bn from $9.5bn, reflecting "higher expected credit losses and other credit impairment charges" in the quarter.

Sector peers Lloyds, Standard Chartered, Barclays and NatWest were also in the red in the UK.

In contrast, Unicredit was a high riser in Milan, up 6% as it upgraded its full-year profit outlook and posted better-than-expected first-quarter earnings. The Italian lender also launched a €35bn all-share offer for Commerzbank despite opposition from the German bank and Berlin, causing shares in Commerzbank to jump 4% in Frankfurt.

AB Inbev surged 7% in Brussels after the Belgian drinks maker's first-quarter sales and profits beat expectations. The Stella Artois maker posted a 5.8% uplift in revenues to $15.3bn, volumes unexpectedly rose 0.8%.

Geberit edged up as the Swiss plumbing materials supplier reported a dip in first-quarter sales that was in line with analysts' expectations.