Shares in Europe rebounded on Thursday, encouraged by a rebound in the US markets which erased early losses to finish higher on Wednesday thanks to a bounce in the oil price.

The rebound in Europe comes in spite of a hefty sell-off in China where the Shanghai Composite tanked over 6%. The dissociation with Asian shares was made possible by the PBOC setting a flat fix for the Chinese yuan after a run of declines to stem capital outflows.

Although oil prices are marginally lower on Thursday, the weekly performance has been relatively strong given that OPEC has made it clear that it will not be cutting production.

The British pound got little in the way of relief after a second revision to fourth quarter GDP confirmed growth of 0.5% q/q. Sterling is dropping on political risk so unchanged economic conditions are not any help.

Well-received earnings from Lloyds and RSA Insurance meant the financial sector was leading the gains on the FTSE 100. The gain across two days in the price of oil helped oil and gas shares as investors in Royal Dutch Shell digested the company’s decision to split its US shale and Canadian sands unit.

Shares of Lloyds gained over 9% after the British bank announced a special dividend while also raising its full-year dividend payment. The rise in underlying profits is encouraging and helps underpin the dividend. Still, the fall in pre-tax profits because of another PPI provision in the fourth quarter is a reminder that Lloyds is still wading through past problems.

RSA Insurance shares gained after reporting a 43% rise in operating profit over the year.

Relief that telecoms regulator Ofcom will not force BT to split from its Openreach division, at least until the next review, helped shares higher by over 2%.

US markets look set for a slightly weaker start ahead of retailer earnings including Sears, Kohl’s and Best Buy as well as durable goods data for January.

USA pre-opening levels

S&P 500: 2 points lower at 1,927

Dow Jones: 22 points lower at 16,462

Nasdaq 100: 5 points lower at 4,195


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