Europe midday: Stocks rise as Stoxx 600 snaps five-day losing streak

European stocks markets were firmly higher on Tuesday morning as equities rebounded from five straight days of losses – that is with the exception of London's FTSE 100 which was being held in the red by heavy losses in the banking sector.

A negative reaction to third-quarter results from Barclays was weighing heavily on the banks in morning trade, causing the FTSE 100 to fall 0.1% by lunchtime.

Nevertheless, the pan-European Stoxx 600 index was up 0.2%, helped by gains of 0.2% in Milan and Madrid, a 0.3% rise in Frankfurt and a 0.5% jump in Paris.

The Stoxx 600 has fallen 3.6% over the past five sessions as rising concerns of an escalating conflict in the Middle East and surging bond yields kept a lid on risk appetite.

On Tuesday, investors were digesting a barrage of corporate earnings and economic data during the morning session, though on the whole indicators were broadly worse than expected. Policymakers will be watching incoming data closely ahead of the European Central Bank meeting on Thursday.

"It’s already reasonable to suggest that the ECB won’t move on rate this week, with the October flash PMIs merely serving to underscore how weak the European economy remains, and with the recent sharp rise in energy prices this weakness is likely to endure," said analyst Michael Hewson from CMC Markets.

Economic data weakens

The economic downturn in the Eurozone deepened in October, with private sector output declining at its steepest rate in 35 months, according to 'flash' purchasing managers' indices (PMIs). The flash Eurozone composite PMI dropped to 46.5 in October, down from 47.2 in September and surprising economists who had expected a slight tick-up to 47.4.

This was the fifth straight month of falling business activity and the lowest reading since November 2020. However, if pandemic-affected months are excluded, this would have been the steepest rate of decline in over a decade, according to S&P Global.

Consumer sentiment in Germany declined for a third straight month in October, as hopes of a recovery before the end of the year begin to fade. The GfK's forward-looking forecast value for the consumer climate in November dropped to -28.1 points, compared with a revised -26.7 the previous month.

The UK unemployment rate ticked up to 4.2% in the three months to August from 4.0% in the three months to July, according to figures released on Tuesday by the Office for National Statistics. The data also showed that the employment rate declined by 0.3 percentage point to 75.7%, while employment fell by 82,000 following a 133,000 drop in the previous quarter.

Barclays down, UniCredit up

Shares in Barclays were down 5.4%, having recovered slightly after falling as much as 8% early on following the bank's third-quarter results. Headline profits were ahead of analysts' forecasts, but the bank cut its guidance for net interest margin (NIM) – a key measure of profitability for retail banks – for 2023.

The full-year Barclays UK NIM – the difference between interest income and the amount it pays back in interest on deposits – was revised to 3.05-3.10%, down from earlier guidance of 3.15-3.20%.

London peers Lloyds, Natwest and HSBC were all trading lower.

Falls in the banking sector were partly offset by a strong performance from the miners, with Rio Tinto leading the charge after an upgrade by Barclays to 'overweight'. Glencore and Antofagasta were also higher.

Over in Milan, Italian banking group UniCredit was out of favour early on but swung into positive territory after raising its revenue forecasts after delivering a 54% year-on-year jump in diluted earnings per share in the third quarter. Intesa Sanpaolo was also heading higher.

French luxury group Hermès was performing well after delivering a 17% jump in revenues to €10.1bn in the third quarter and giving an upbeat outlook. "In the medium-term, despite the economic, geopolitical and monetary uncertainties around the world, the group confirms an ambitious goal for revenue growth at constant exchange rates," the company said.