Europe midday: Stocks dip, banks hit by reports of money laundering
Stocks have slipped into the red despite the announcement overnight of a raft of new stimulus measures in China, alongside some unexpected good news from the Continent itself.
Nevertheless, some strategists, such as at Bank of America-Merrill Lynch, were cautioning about the potential downside risks that might lie ahead over the next few months, although on longer time frames, say 12 months, there might be reasons to be more positive.
"While the worst case of a no-deal Brexit has diminished, negative political catalysts remain for the next few months: unresolved trade tensions between the US and EU on Autos will only be clarified by mid-May, and risks of greater populist vote share in EU parliamentary elections in May raises policy uncertainty and risk premia," BofA-ML said in a research report sent to clients.
"Ultimately", reflation in China should favour Europe, the investment bank added.
On Monday night, Chinese officials unveiled a combination of various tax cuts and plans to reduce reserve requirement ratios for smaller companies.
As of 1359 GMT, the benchmark Stoxx 600 was drifting lower by 0.20% to 374.34, alongside a dip of 0.06% to 11,586.06 for the German Dax while the FTSE Mibtel was off 0.11% to 20,701.25.
Sector-wise, gains were being paced by one of the worst performers year-to-date, Telecommunications, with the corresponding sub-index on the Stoxx 600 adding 0.94% to 240.25 but trading off earlier highs.
Going the other way, a subindex of European lenders' shares was down by 0.64% to 143.22 in the wake of multiple reports alleging that they may have been used in transactions involving illicit money originating from Russia.
Meanwhile, front month Brent crude oil futures had reversed course and were up by 0.68% to trade at $66.12 a barrel on the ICE.
To take note of, on Monday America's S&P 500 had failed to make any fresh inroads above the 2,820 point area and come Tuesday some market commentary was pointing out the so-called 'overbought' levels which had been reached by gauges such as the EuroStoxx 50.
Echoing a widely-shared view among other traders, Neil Wilson, chief market analyst at Markets.com, said: "It’s also as we look at the global picture a case of markets pausing for breath, taking some profit and – as I said in yesterday’s note – a buy the rumour, sell the news type trade. Look for pull backs ahead of the ink drying on any deal between the US and China."
In other economic news, IHS Markit's closely-followed composite euro area output index for February was revised up significantly, from a preliminary reading of 51.4 to 51.9.
Nevertheless, the survey compiler warned against reading too much into those numbers.
"However, the survey remained subdued as other headwinds continued to increasingly constrain business activity. These include slowing global economic growth, rising geopolitical concerns, trade wars, Brexit and tightening financial conditions," said Chris Williamson, chief business economist at IHS Markit.
Vodafone was a top gainer after announcing plans for a €4.0bn issue of convertible bonds to finance the acquisition of Liberty Global assets.
Shares of Austrian lender Raiffeisen Bank on the other hand were down by 12.43%, following a report that Hermitage Fund, founded by British financier Bill Browder, had filed a report with prosecutors in Vienna alleging that Raiffeisen's predecessor, RZB, had helped launder monies linked to tax fraud in Russia.
Stock in Dutch lenders ABN AMRO and ING were also lower, on the heels of a report in De Groene Amsterdammer magazine, from the day before, that a Russian money laundering network had used accounts at the country's top three banks, which included Rabobank.