Europe midday: Stocks fall but euro gains on better-than-expected PMI data

On the eve of the European Union’s 60th anniversary, European stocks were on the back foot after a key vote on a US healthcare bill was postponed, but the euro strengthened after data showed the eurozone's recovery had gained momentum.

At midday, the benchmark Stoxx Europe 600 index fell 0.37% to 375.82, Germany’s DAX was down 0.18% to 12,018.41 and France’s CAX was 0.45% weaker at 5,010.24.

Meanwhile, Brent crude was up 0.35% to $50.74 per barrel and West Texas Intermediate rose 0.5% to $47.94.

The euro gained ground after PMI data suggested the eurozone’s economic recovery is gathering pace with the currency up 0.17% versus the dollar to 1.0801 and 0.43% higher against the pound to 0.86495.

Markit's flash eurozone composite purchasing managers' index rose to 56.7 in March, from 56.0 the month before, beating expectations for a small drop to 55.8 and marking its best level since April 2011.

The flash eurozone services PMI increased to 56.5 from 55.5, beating expectations for a nudge down to 55.3. The manufacturing PMI increased to 56.2 in March from 55.4. Economists had been expecting a reading of 55.3.

The better-than-expected PMI data was due to faster job growth, higher business activity and rising inflationary pressures largely driven by higher commodity prices and weak currency.

Craig Erlam, senior market analyst at Oanda, said that that these positive signs will likely ask questions of the European Central Bank later in the year.

“The ECB will reduce its monthly purchases as of next month in a move that it insisted is not tapering and yet, markets now appear to be expecting another reduction later this year, if not a rate hike. I still think the ECB needs to take a cautious approach here as the region continues to be split between those with a strong economy, low unemployment and inflationary pressures and those at the other end of the spectrum, with others somewhere in the middle.

“Managing the two or even three tier eurozone is going to be the next great challenge for the central bank. It seems that no matter what it does from here, there is going to be dissent.”

Elsewhere, investors were also digesting news that the US congressional vote on the repeal of the Affordable Care Act, or Obamacare, was delayed on Thursday by 24 hours.

It added to concerns that Donald Trump lacks enough support in the House of Representatives, even though the Republicans have majorities in both houses, and may struggle to get approval for the stimulus policies he has promised.

In corporate news, Smiths Group rose 2.96% after the engineer reported flat first-half revenues of £1.6bn on an underlying basis but growth of 18% on a reported basis thanks to the weak pound.

Acacia Mining fell 1.34% after saying there has been no change on the Tanzanian government's ban on exports of gold and copper ore despite efforts by the company. The miner has been “engaging with key government official and other stakeholders” in order to lift the ban which has been in effect since 3 March.

Merck was up 0.38% after the German drugmaker’s intravenous treatment, Bavencio, received approval from the US Food and Drug Administration.