Europe midday: Stocks dip at the start of the month, investors eyeing US jobs data

Stocks on the Continent are giving back early gains as investors await the release of the all-important monthly US non-farm payrolls report, amid another down day for lenders' shares.

Investors were also mulling over news out overnight that China had promised to "substantially" ramp-up its purchases of US goods, with Beijing and Washington making plans for further meetings over the next month.

Taking the gloss off of that news however, a key survey of Chinese factory sector conditions for January came in well below forecasts.

"While European markets enjoyed a decent January performance with a strong performance, the recovery seen over the past few weeks hasn’t, as yet, been enough to reverse the losses seen in December, however as a start to the year, it’s still been an encouraging rebound," said CMC Markets UK's Michael Hewson.

"This rebound has come about despite a continued deterioration in economic data from around the world, as well as little evidence of significant progress in US, China trade talks. The change in sentiment has been largely brought about by a change of tone from the US Federal Reserve, which was confirmed earlier this week with a very dovish tone from US policymakers on the prospect for future rate rises, as well as balance sheet reduction."

On a more constructive note, on Thursday strategists at Bank of America-Merrill Lynch told clients that bearish positioning and so-called 'policy capitulation' by central banks was "consistent with further Q1 risk asset upside".

As of 1311 GMT, the benchmark Stoxx 600 was down by 0.37% or 1.32 points to 357.33, alongside a drop of 0.36% or 40.14 points to 11,132.98 for the German Dax and a 1.65% or 323.71 point retreat to 19,409.16 on the FTSE Mibtel.

The Stoxx 600's sector gauge for banks meanwhile was down by 1.33% at 136.89, with losses for Deutsche Bank shares catching the eye of many traders after the lender posted weaker-than-expected fourth quarter profits.

On the economic front meanwhile, IHS Markit confirmed a retreat in its euro area manufacturing sector Purchasing Managers' Index from a reading of 51.4 for December to 50.5 in January.

Eurozone consumer prices on the other hand surprised to the upside, with Eurostat reporting that the year-on-year rate of consumer price gains slipped from 1.6% for December to 1.4% in January.

Further afield, the Caixin China factory sector PMI came in at 48.3 for January, which was down from a reading of 49.7 in December and well below the consensus forecast of 49.6.