Europe midday: Stocks drift lower as corporate results, Daimler investigation weigh

Stocks were drifting lower going into the weekend, weighed down by slightly weaker than expected readings on the euro area economy and a spate of poor quarterly corporate reports out on Wall Street overnight.

To take note of, a Bloomberg report of further easing by the Bank of Japan at its 28 April policy meeting set off selling in the yen but also led to some market-chatter among traders about the 'defensive' nature of the moves seen of late from many major central banks in their attempts to try and stem deflationary forces and kick-start activity.

By 12:03 BST the benchmark DJ Stoxx 600 was 0.27% or 0.96 points lower to 348.61, the Dax was down by 0.33% or 34.41 points at 10.399.12 and the Cac-40 was seeing a decline of 0.21% or 9.52 points to 4,572.65.

“Earnings season continues to underwhelm on both continents and the economic data doesn’t give much to be happier about.

It’s worth noting that we are still broadly higher on the week but still, there is a feeling that we needed a decent earnings season to justify equities at these elevated levels, particularly in the US where the Dow and S&P 500 are within touching distance of all-time highs. Even with the bar being set very low, US corporates have so far failed to impress, let alone blow us away,” Craig Erlam, senior market analyst at Oanda, said in a research note sent to clients.

Overnight on Friday, Bloomberg reported that the Bank of Japan might offer negative rates on its so-called stimulative lending facility which were currently at 0%, citing "people familiar with the matter", in a bid to help offset further reductions in its main policy interest rates into negative territory.

Adding to the downbeat mood, Markit's ‘flash’ composite purchasing managers' index for Germany dipped from a reading of 54.0 in March to 53.8 in April, a nine-month low, as a gauge of service sector activity weighed.

On the other hand, the 'flash' manufacturing PMI for the euro area's largest economy - arguably the most important of the two - improved from a reading of 50.0 to 51.9 (consensus: 50.7).

Despite that, and commenting on the equivalent PMI data covering the whole of the euro area, Chris Williamson, chief economist at Markit said: “A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months.”

Euro/dollar was drifting lower by 0.09% to 1.1276.

The automobiles&parts sector was acting as the main drag on European indices on Friday, with the DJ Stoxx 600 sector gauge down 3.31% to 338.28 after Daimler disclosed the US Department of Justice was conducting a probe into its emissions certification process.

The carmaker's shares fell 6.02% to €62.04 having also reported its latest first quarter results.

Zodia Aerospace was the biggest gainer on the Pan-European Stoxx 600, rocketing 10.56% to €21.09 on reports that French rival Safran might be studying an offer to take out the aerospace supplier, whose shares had been pumelled after delivering eight warnings over the last six months.

Swedish truck maker SSAB lifted its forecast for the continent's truck market, although it turned more pessimistic on North America and Brazil.

Spain's Banco Sabadell saw first quarter net profits jump 44% following its acquisition of UK rival TSB.