Europe midday: Shares mixed in thin volumes; Raiffeisen, TIM lower

European shares were mixed at midday in what was expected to be a quiet day with US markets close for the President's Day holiday while China's decision to hold interest rates boosted sentiment.

The pan-European Stoxx 600 index was up 0.16% at 1140 GMT with most major regional bourses higher. Britain's FTSE was flat and just above the 8,000-point mark while France's CAC went into reverse.

In economic news, the People’s Bank of China left its 1-year loan prime rate unchanged for February at 3.65%. It also left its 5-year loan prime rate, a reference for mortgages, unchanged at 4.30%, widely in line with expectations.

The PBOC last week left its medium-term lending facility loans rate unchanged at 2.75% while injecting more liquidity into the banking system as corporate loan demand recovers.

On the geopolitical front, tensions between the US and China were ratcheted up as US Secretary of State Antony Blinken warned top Chinese diplomat Wang Yi of consequences should Beijing provide material support to Russia's invasion of Ukraine.

Meanwhile, Eurozone construction output fell in December, mainly due to a sharp slump in Germany, according to official data released on Monday.

Construction production declined 2.5% on the month following a revised 0.1% drop in November. The figures showed that Germany suffered the biggest monthly fall in construction output, at 8%, followed by Austria at 7.6% and Poland at 3.8%.

Output in the eurozone's civil engineering sector decreased by 4% on the month in December, while building construction production was 2.3% lower.

With little corporate news to drive markets, analysts are expecting thin trade.

"Volumes are set to be more muted during the sessions in Europe given that Wall Street is closed for the President’s Day holiday, so traders are likely to be searching around for a bit of a sense of direction today, looking ahead to fresh data out this week," said Hargreaves Lansdown analyst Susannah Streeter.

"The minutes of the Federal Open Market Committee due out on Wednesday will be closely watched for fresh indications about just how strong those disinflationary winds are blowing. Worries are still hanging around that US inflation will still take significant time to be whipped into a shape which will mean higher rates will have to linger for longer, sentiment which has been supporting the dollar."

"For now, it seems optimism about the recovery of demand in China is outweighing worries about a slowing US economy, with stocks on Chinese indices buoyed by the status quo decision to keep rates on hold. This has helped push up the price of crude oil, off the back of expectations that companies in China will be hungry for more energy, particularly as consumer sentiment rebounds."

In equity news shares in Raiffeisen Bank fell sharply after the Austrian Bank had on Friday revealed it had received a request for information from the United States' sanctions authority about its business related to Russia.

Telecom Italia shares fell as a government-sponsored offer rivalling KKR's bid for the former phone monopoly's grid failed to materialise over the weekend.

Forvia, the European car parts maker that emerged born from Faurecia's takeover of Hella, forecast stable 2023 sales, sending Faurecia shares higher.

Reporting by Frank Prenesti for Sharecast.com