Europe midday: Italian issues underperform, Greece in focus

Shares on the Continent were little changed overall, although Italian stocks remained under selling pressure as investors reacted to reports that Brussels might be set to slap a fine on Italy over its public finances.

In the background meantime, investors were still assessing what the possible implications of the past weekend's elections to the European parliament might be.

"The dominant, pro-EU centre ground stands fragmented in Brussels though the gains made by populists were slimmer than expected," said analysts at Rabobank.

"Though this comes as welcome news, the fact that gains were made by anti-EU, far right and nationalist movements sends a warning blow to the EU establishment – change is required and the dominance of the established parties is in the descent."

As of 1200 BST, the benchmark Stoxx 600 was drifting lower by 0.25% to 375.77, alongside a drop of 0.23% to 12,042.83 for the German Dax, while the FTSE Mibtel was off by 0.83% to 20,192.66.

Greek stocks on the other hand were adding to Monday's big gains after Prime Minister Alexis Tsipras said he would call snap elections, which some market commentary said might see the pro-business New Democracy party come to power.

On the back of the news, the Athens's Stock Exchange's general index was up by another 0.73% to 78.2.25.

In parallel, the yield on the benchmark 10-year Italian government note was rising by three basis points to 2.71%, having jumped by 13 points during the prior session.

Reports on Monday had indicated that the European Commission could initiate a disciplinary procedure against Rome as soon as 5 June and although Brussels had never imposed a fine on any euro country because of excessive government spending, the news had already weighed heavily on Italian government debt on Monday.

Shares in Renault and Fiat reversed early losses and were adding to the prior day's surge on the back of news of their proposed merger which, if successful, would result in the creation of the world's third largest carmaker.

Their advance was helping to bolster the wider sector, with the Stoxx 600 sector gauge for Autos&Parts climbing 1.15% to 478.69.

Stock in SAS was unwanted after the Swedish airline group reported a second quarter loss of 1.22bn krona, which was more than twice the 488m krona of red ink recorded one year ago (consensus: SEK808m).

On the economic front meanwhile, the latest reading on German consumer confidence revealed that sentiment in the euro area's largest economy resumed the slight downward trend which had been in place since the beginning of 2018.

GfK's consumer confidence index for German dipped from May's downwardly revised reading of 10.2 to 10.1 for June.

Nonetheless, Claus Vistesen at Pantheon Macroeconomics believed that the survey continued to point to "decent" growth in consumer spend overall, although he expected a slowdown to materialise in the second quarter.

On a stronger note, the European Commission's economic sentiment index for the euro area rose from a reading of 103.9 for April to 105.1 in May, for the first increase since June 2018.

The European Central Bank meanwhile reported that the rate of growth in the euro area's money supply picked up from March's annualised rate of increase of 4.6% to 4.7% for April (consensus: 4.4%).