Europe midday: Stocks pare losses, China data undermines basic resources and auto shares

Stocks on the Continent are attempting to stage a comeback after a key gauge of manufacturing sector conditions set off a wave of selling at the opening bell.

Amid thinner than usual trading volumes, the above saw investors look past the Italian parliament's approval of the government's 2019 budget plans at the weekend and reports of progress in the ongoing trade spat between the US and China.

Summing up the mood in markets after a very difficult 2018 for investors, analysts at Rabobank said: "So we are entering 2019 on a bad footing, with Asian equity indices firmly in the red (the Hang Seng at -2.8%) and 10y German bunds opening the year at 0.18%, within a whisker of their 2-year low.

"One always has to be careful in the first week of the year, when liquidity is not great, but if this sets the tone, then brace for impact!"

As of 1327 GMT, the benchmark Stoxx 600 had recovered roughly two thirds of an earlier fall to trade down by 0.64% or 2.17 points to 335.48, while the German Dax was off by only 0.19% or 20.27 points to 10,538.71.

France's Cac-40 on the other hand remained1.30% or 61.53 points lower and was changing hands at 4,668.99.

By sectors meanwhile, the Stoxx 600's subindices for Basic Resources (-3.53%) and Auto&Parts (-1.88%) were faring worst, weighed down by the news out of China.

Overnight, survey compilers Caixin and IHS Markit had reported a drop in their manufacturing sector Purchasing Managers' Index from a reading of 50.2 in November to 49.7 for December, marking the lowest reading since May 2017 and the first contraction in 19 months while missing expectations of 50.1.

The figures confirmed a trend seen in the official PMI released on Monday, which slipped to 49.4 in December - its weakest level since early 2016.

"This is not a good indicator as we eye tariffs biting even harder in 2019 than they did last year,” said Neil Wilson, chief market analyst at Markets.com.

"On the whole, there is little to cheer about, unless you’re viewing this as a chance to snap up some bargains. Following the worst year in a decade for global equities, it’s little surprise to see a tentative start to 2019 and this does create opportunities, but investors should be prepared for more volatility ahead."

The weak Chinese data also appeared to offset news overnight that US President Trump was reaching out to Congress to help end the partial government shutdown. Trump has reportedly invited congressional leaders to a White House briefing on border security on Wednesday.