Europe midday: Stocks dip as analysts mull outlook for central bank policy

Stocks on the Continent are trading mostly lower after a better than expected US jobs report for June, released during the previous session, led economists to pare their bets for rate cuts by the Federal Reserve when rate-setters next meet to decide on policy on 30-31 July.

"European markets are grinding higher in early trade today, as the prospect of a less aggressive Fed easing stance is holding back a full resumption of the bullish trend evident throughout June," said Chris Beauchamp, chief market analyst at IG.

In the background, over the weekend, strategists at Morgan Stanley moved from an 'equalweight' stance on global equities to 'underweight', telling clients that there was a poor risk/reward on offer for over the next three months and trimming their exposure to US and Emerging Market equities.

The second quarter might see analysts' earnings estimates for companies rest lower, global Purchasing Managers' Indices continued to point to "plenty of downside risks" and the pause in US-China trade tensions had done little to resolve the underlying factors behind the spat, they said.

Defensive leadership and seasonality also looked "more problematic", Morgan Stanley added.

As of BST 1158 BST, the benchmark Stoxx 600 was edging lower by 0.09% to 389.74, alongside a drop of 0.20% for the German Dax, although Milan's FTSE Mibtel was adding 0.08% to 22,002.79.

Greek stocks were also moving lower, with the Athens Stock Exchange's general index down by 1.21% at 883.84, even after centre-right opposition party New Democracy won the country's general elections at the weekend and possibly an absolute majority in the Parliament in Athens.

Greece's 10-year bonds initially jumped on news of new PM Kyriakos Mitsotakis's victory, pushing their yield down by another 14 basis points to 2.01%, but were last off by a lesser four points to 2.11%.

On 5 July, the US Department of Labor reported a 224,000 jump in monthly US non-farm payrolls (consensus: 158,000), leading economists to shelve forecasts for a 50 basis point rate cut in short-term interest rates at the July Federal Open Market Committee meeting, although a 25 basis point reduction continued to be fully priced-in, Fed funds futures showed.

On the corporate side of things, all eyes were on Deutsche Bank after it announced a wide-ranging cost-cutting plan involving roughly 18,000 layoffs.

Stock in the lender, which now expects to record a second quarter loss of €2.8bn and to cancel its dividend payout for both 2019 and 2020 was trading down by roughly 1.2%.