Europe midday: Shares rally despite China property sector woes

European shares rallied in muted trading at midday despite worries over China’s troubled property sector sending markets into the red at the open.

The pan-European Stoxx 600 was up 0.22% after a weaker session in Asia saw shares in Hong Kong fall more than 2%.

Chinese property developer Country Garden warned of a massive $7.6bn loss in the first half of 2023 and said it was struggling to meet its debt obligations as it suspended trading on 11 of its onshore bonds.

Shares in the company plunged 15%, sparking more concerns about the state of the world’s second-biggest economy. Oil prices slid lower with Brent crude sliding below $86 a barrel.

China-exposed miners and oil producers fell, with Orron Energy lower, along with BP and Shell.

"A crisis in the Chinese real estate sector is a story the market has heard before and not one which has typically come with a happy ending for stocks,” said AJ Bell investment director Russ Mould.

“This latest calamity is reflective of a recovery which has not lived up to expectations since the world’s second largest economy ditched zero-Covid measures at the end of last year."

"The usual catalogue of names with Chinese ties were under the pump including Burberry, Standard Chartered and Prudential. The one silver lining for the West may be a deflationary impact from China’s woes which helps in the battle against inflation."

“The higher than anticipated rate of US producer price inflation reported on Friday – often a good indicator of the trajectory of consumer prices – is helping to sour sentiment and raises the stakes ahead of UK CPI figures on Wednesday this week."

“A significant fall to 6.8% is expected, anything short of that could prompt another surge in gilt yields – drawing groans from anyone set to remortgage or take out a new mortgage any time soon."

Among stocks making gains, Philips rose almost 5% after Dutch investment firm Exor took a 15% stake in the healthcare company.

Reporting by Frank Prenesti for Sharecast.com