Europe midday: Markets mixed as FTSE climbs, DAX falls

European stocks were broadly flat on Tuesday as a decent performance in London was offset by a fall in Frankfurt and only minor gains across the rest of the continent.

The FTSE 100 was trading 0.5% higher by the midday point on the back of a positive reaction to oil giant BP's fourth-quarter results. However, the pan-European Stoxx 600 Index was up just 0.05% after the morning session.

The cautious start to the session followed falls on Wall Street on Monday after Federal Reserve chair Jerome Powell said that the central bank was in no rush to cut interest rates. Powell echoed comments made at the Fed's most recent monetary policy meeting, saying that the "economy's in a good place" after resilient economic data over the past few months, including last Friday's particularly strong non-farm payrolls report.

"European markets have kicked off the week on an uncertain footing, as traders weigh up the fallout from a week that ended with a dramatic surge in payrolls," said analyst Joshua Mahony from Scope Markets. "Sunday’s comments Powell saw the Fed chair lay out expectations for just three rate cuts this year. A far cry from the five expected by markets."

Economic data comes in mixed

In European macro news, German factory orders rose 8.9% on the month on a seasonally and calendar adjusted basis following a flat reading in November – surprising economists who had expected no change. On the year, factory orders were 2.7% higher in December following a 4.7% decline the month before.

Eurozone retail sales fell 1.1% in December, according to Eurostat, capping off a tough 12 months for consumers. December's reading was slightly worse than the 1.0% drop expected by economists, with retail food sales down 1.6% on the month, while non-food retail sales were down 1.0%.

The UK construction sector remained in contraction territory in January. The S&P Global/CIPS construction purchasing managers’ index rose to 48.8 from 46.8 in December. While still activity was still declining, this marked the highest reading since August 2023 and was above consensus expectations of 47.3.

BP boosts FTSE 100

BP shares were up nearly 6% after the company announced a $1.75bn share buyback despite a slump in annual profits as oil prices fell during 2023 from the spike caused by Russia's invasion of Ukraine. Fourth-quarter profits came in at $3bn and, although well down on 2023’s $4.8bn, it was better than the $2.77bn in its own compilation of consensus forecasts.

Investment bank UBS was lower after posting its second consecutive quarterly as costs related to integrating its fallen rival Credit Suisse weighed on the group. UBS reported a net loss attributable to shareholders of $279.0m for the quarter, though better than the $372.0m expected by analysts. For the fourth quarter, underlying operating pre-tax profits came in at $592.0m, below internal expectations for a reading of $762.0m.

Auto stocks were a weak spot in Frankfurt, providing a drag on the DAX, with Porsche and Volkswagen among the worst performers of the day.

Meanwhile, German semiconductor Infineon Technologies was trading firmly lower after cutting its guidance for 2024 revenues by €1bn on the back of weaker-than-expected chip demand.