Europe midday: Shares stay in the red as US debt talks dominate

European shares were lower on Tuesday as talks on the US debt ceiling continued and survey data showed a slowdown in eurozone business activity, while shares in Julius Baer fell on a poor update.

The pan-European index was down 0.25% in early deals. US President Joe Biden and House of Representatives leader Kevin McCarthy held “constructive” talks overnight.

“Debt ceiling talks are inching forward, but it’s slow progress, and with uncertainty hanging in the air, gains on equity markets are being held back,” said Hargreaves Lansdown analyst Susannah Streeter.

“If no agreement is reached, the US could default on interest it owes on its debts, sending borrowing costs soaring and sending shockwaves through the global economy.”

In economic news, the eurozone composite PMI jumped to 54.1 from 52 in March, mainly driven by services as manufacturing stagnated.

Elsewhere, the UK government borrowed more than expected last month as energy support schemes, benefit payments and higher debt interest payments pushed up spending, according to figures released on Tuesday by the Office for National Statistics.

Net borrowing for April came in at £25.6bn, well above expectations of £19.1bn and up from April's £13.7bn.

It was also above the Office for Budget Responsibility's forecast of £22.4bn and marked the second-highest April borrowing figure since monthly records began in 1993.

In equity news, Swiss private bank Julius Baer fell 8.15% in early trade after its quarterly results missed expectations.

Vivendi fell 7% on news that controlling shareholder Vincent Bollore sold shares in the French media group.

RS Group - formerly Electrocomponents - fell after it said trading over the first seven weeks of 2023/24 reflected "a slowing" in industrial growth, and pointed to continued weakness and aggressive competition in electronics.

Reporting by Frank Prenesti for Sharecast.com