Europe midday: Stocks down in choppy trade; FOMC speak in focus

European stocks were down in choppy trade by midday as investors weighed up some encouraging German data against weaker oil prices and the possibility of a June rate hike by the US central bank.

The benchmark Stoxx Europe 600 index was down 0.5%, Germany’s DAX was off 0.8% and France’s CAC 40 was 1% lower.

At the same time, oil prices retreated amid ongoing supply glut concerns as Iran said it had no plans to freeze production. West Texas Intermediate was down 1.2% to $47.83 a barrel and Brent crude was 1.1% lower at $48.18.

The session had kicked off in the red after data showed Japanese exports fell 10.1% on the year in April, in line with forecasts but a much weaker performance than March’s 6.8% drop. Imports slumped 23%, missing expectations for a 19% decline.

Investors were also busy digesting comments from St Louis Federal Reserve President James Bullard, who said in a speech in Beijing that a tight labour market in the US could put pressure on inflation, in turn underpinning the argument for higher interest rates.

Speeches from Fed Reserve Bank of San Francisco President John Williams and Philadelphia Fed President Patrick Harker later in the day will also be scrutinised.

“US interest rate speculation remains the favourite pastime in City dealing rooms as focus shifts from corporate earnings to data,” said Lee Wild, head of equity strategy at Interactive Investor.

“It is inevitable that the ‘will they, won't they?’ debate about a June hike in US interest rates will rumble on right up until decision time. The hot money's on another pause, but the more data keeps telling policymakers the US economy is healthy, the greater the risk of a shock.

“However, it would be a brave Fed that raised rates just a week before the EU referendum and just months ahead of the US presidential election. A policy error now could have serious consequences, threatening both fragile economic growth and a fresh slump in commodity prices.”

In corporate news, lost-cost carrier Ryanair edged higher after reporting a 43% jump in full-year net profit but cautioning that profit growth for this year is likely to be modest.

Legal & General was touch lower after announcing the acquisition of a £3bn annuity portfolio from Aegon.

German drugs company Bayer was under the cosh after making a $62bn bid for US agriculture group Monsanto.

French Insurer AXA was a little weaker after it announced plans to sell all its exposure to tobacco companies, valued at approximately €1.8bn.

Italian-American car maker Fiat Chrysler was also in the red following a press report the German regulator suspects it used illegal software to cheat emissions tests.

On the economic front, Markit’s flash composite purchasing managers’ index for Germany rose to a five-month high of 54.7 in May from 53.6 in April, beating economists’ expectations for a reading of 53.8.

The manufacturing PMI increased to a five-month high of 52.4 from 51.8, surpassing expectations of 52.0, while the services PMI edged up to a three-month high of 55.2 from 54.5 in April, ahead of estimates of 54.6.

The flash Eurozone composite purchasing managers’ index slipped to a 16-month low of 52.9 in May from 53.0 in April, missing expectations for a reading of 53.2.

The services PMI was unchanged at 53.1, undershooting forecasts of 53.3.

Meanwhile, the manufacturing PMI dipped to a three-month low of 51.5 from 51.7 in April, missing estimates of 51.9.