Europe midday: Stocks hold lower ahead of Fedspeak, votes in Italy and Germany
Stocks are holding lower at the start of the month, with traders apparently continuing to try and digest the potential implications for equities of a modestly more hawkish policy bias from rate-setters in the US and ahead of two key votes at the weekend in Italy and Germany.
"European equities are firmly in the red this morning, with continental stocks underperforming their London listed rivals. This derives from much the same drivers as yesterday, with uncertainty regarding the outcome of both this weekend's Italian election, and of course Brexit, but exacerbated by further concerns about too-aggressive Fed monetary policy tightening, risking the economic recovery, after weaker than expected US GDP and housing data yesterday," said Mike van Dulken at Accendo Markets.
As of 1310 GMT, the benchmark Stoxx 600 was down by 0.95% or 3.60 points to 376.03, alongside a fall of 1.52% or 188.81 points to 12,247.47 on the German Dax, while the FTSE Mibtel was under by 0.88% or 198.09 points and trading at 22,409.64.
Meanwhile, the yield on the benchmark 10-year German bund was three basis points lower to 0.63%.
On 4 March, Italian voters would be called on to vote in parliamentary elections, amid concerns that political gridlock in the Eurozone's third largest economy would stymie efforts aimed at economic reforms.
That same day, the results would be revealed of a ballot among members of Germany's SPD on whether to form a grand coalition with the CDU/CSU.
Somewhat ironically, the flow of economic data out on the Continent on Thursday was in fact rather positive if anything.
Of particular importance, IHS Markit's euro area factory sector PMI slipped from a reading of 59.6 for January to a reading of 58.6 in February, which was nevertheless a tad ahead of the consensus forecast of 58.5.
Commenting on the data, Claus Vistesen, chief euro area economist at Pantheon Macroeconomics said: "Overall, these data signal solid momentum in Eurozone manufacturing albeit at a slightly slower pace in February compared to the breakneck pace at the start of the year. Growth is strongest in the investment good sector, but all industries are enjoying solid demand conditions.
"The expansion continues to push firms closer to their capacity limits; work backlogs are rising and companies are scrambling to find workers to meet increasing demand. Finally, both input and output price gauges point to much higher inflation pressures in coming months, although we haven’t seen much of this in the CPI data yet."
In parallel, Eurostat reported that the Eurozone's rate of unemployment dipped by a tenth of a percentage point last month to 8.6%, as expected by economists.
For later in the day, investors were waiting on a barrage of US economic data, including the latest reading on the 'core' personal consumption expenditures prices - the US central bank's preferred inflation gauge - at 1430 GMT and the ISM's factory sector purchasing managers' index at 1500 GMT.
Investors were also expected to keep a close eye on recently-appointed Fed chair Jerome Powell's second day of testimony, this time before the US Senate's banking committee.
On the corporate front, investors were keeping an eye on Deutsche Post's negotiations with its main union Verdi and its latest offer for higher wages, which Verdi said was below expectations.
Also in Germany, and of potential interest for investors in Airbus, the country's defence ministry said it would give European jets preference over US made rivals in an upcoming tender to replace its veteran fleet of Tornado jets.