Europe midday: Stocks claw back early losses, some equity strategists sanguine

European shares are clambering back from early sharp losses, with investors looking past weakness on Wall Street overnight on fading US stimulus hopes offset in part of by reports of new fiscal measures from the UK government in the pipeline.

And despite recent selling pressure, some equity strategists were sounding a sanguine note.

"The world economy rebounded in Q3, led by the US, and a COVID vaccine now seems likely by year-end," said analysts at Barclays Research.

"While the US presidential election is a near-term downside risk, we are overweight global equities over fixed income, given the recovery, supportive central banks, and potential vaccine approval."

The pan-European Stoxx 600 index was down 0.38% to 358.21, although fears that tougher coronavirus restrictions were almost inevitable in the UK were keeping London’s FTSE 100 0.29% lower at 5,883.97.

Offsetting those concerns, nvestors were also awaiting details of a new jobs support package from Finance Minister Rishi Sunak.

In the eurozone, France’s CAC had reversed a nearly 1% fall to trade off by just 0.06% to 4,799.29, with Germany’s DAX in the green by 0.15% at 12,661.38 even after PMI readings on Wednesday showed the services sector in both countries has started to contract once again in September.

The early sell-off in Europea stockmakerts was driven by worries that the US Congress would not agree extra fiscal stimulus to counter the ongoing Covid-19 crisis, meaning there may be no further support until 2021.

In London, Sunak on Wednesday cancelled the Budget scheduled for next month and was set to announce a new support package later on Thursday to replace the furlough scheme that finishes at the end of October.

Speculation centred on wage subsidies and targeted aid for exposed sectors, such as leisure and hospitality, which have been hit by fresh curbs on trading hours.

In equity markets, engine maker Rolls-Royce and GKN owner Melrose Industries were under the cosh again amid concerns about the impact of Covid-19 on the airline industry.

British Airways and Iberia owner IAG, Airbus, InterContinental Hotels and easyJet were also trading lower.

Elsewhere, Smiths Group was in the red after it posted a drop in annual profit but reinstated its dividend and said business was stabilising.

Cineworld sank after saying it swung to a loss in the first half after its cinemas were forced to close in March due to the pandemic and warned it would need to raise additional liquidity if its cinemas were shut again.