Europe midday: Stocks drift lower as OECD flags risk of second Covid-19 wave

Stocks are holding slightly lower ahead of the US central bank's policy announcement scheduled for later in the day and after the Organisation for Economic Cooperation and Development issued a dire forecast for world growth in 2020.

Commenting on the mood in the markets, IG's Josh Mahony said: "European markets are on the back foot once again despite early gains, with traders fearing that the recent recovery in stocks could see Powell take his foot off the gas."

"Meanwhile, OECD projections highlight how detrimental a second wave could be for the recovery."

As of 1230 BST, the benchmark Stoxx 600 was dipping 0.1% to 369.16, alongside a 0.19% drop for the German Dax to 12,592.90 while the FTSE Mibtel was 0.67% lower at 19,798.15.

Following, in particular, a much stronger than expected reading on US non-farm payrolls for May, some investors were cautious about the possibility that the Federal Reserve might moderate its easing bias and the effect that might have on market sentiment, especially in the government bond market.

Investors were also thumbing through the OECD's latest projection of a 6% drop in global GDP this year, which was even worse than the 5.2% fall predicted by the World Bank just the day before.

The rich world's economic watchdog also warned that if a second wave in the pandemic ensued then growth could fall by 7.6%, attaching even odds to the two scenarios.

Pacing losses on the Stoxx 600 were industrial and travel, and leisure names, which were retreating by 1.72% and 2.02%, respectively.

Weighing on the former was a weaker than expected reading on China producer price data overnight, although analysts at Pantheon Macroeconomics believed that last month's drop might mark the trough for factory gate inflation in the Asian giant.

Furthermore, the latest so-called "narrow" money supply data pointed to a further pick-up in economic growth, they said.

Meanwhile, in Germany, the country's interior minister said that Berlin would lift border controls on all neighbours by mid-June and with non-European nations by the end of August.

At the individual company level, Inditex's shares were down after the Spanish retail giant posted its first quarterly loss since becoming a public company two decades before.

Credit Suisse stock was also on the back foot even after its finance chief told a Goldman Sachs conference that the investment bank was continuing to see a "significant" improvement in capital markets activity as corporates tap investors for funding, either to refinance, issue fresh capital or debt.

The hard economic data meanwhile continued to make for grim reading, with INSEE reporting that French industrial production slumped at a 20.1% month-on-month pace in April, with output of capital goods down 32.7% and that of transportation equipment cratering by 47.5%.