Europe midday: Stocks lower on strong German ind production data

European equity markets were a little lower on Wednesday after strong German industrial production data, while analysts looked towards the European Central Bank's policy decision on interest rates on Thursday.

At midday, the benchmark Stoxx Europe 600 index was down 0.22% to 371.44, Germany’s DAX fell 0.21% at 11,941.58 and France’s CAC 40 was 0.32% weaker at 4,939.20.

Meanwhile, Brent crude was down 0.9% to $55.42 per barrel and West Texas Intermediate was 0.98% weaker at $52.62.

In currency markets, the euro was flat against the dollar at 1.0560 and up 0.36% versus the pound at 0.86924.

The main data release for Wednesday was German industrial production, which rose 2.8% in January after a 2.4% fall in December. This comes in line with latest business survey reports and suggests that the sector is on course to contribute to first quarter growth.

Investors are eyeing the European Central Bank’s policy decision on Thursday with analysts expecting a dovish tone by ECB president Mario Draghi.

“We think the current ‘truce’ between the hawks and doves will be reflected in a dovish tone by Draghi this week, with no decision. After the summer, though, we think a proper debate about the future of quantitative easing will be unavoidable," said Bank of America Merrill Lynch analysts.

“We expect the ECB meeting to be a non-event for the euro. Draghi bought time when he extended quantitative easing by a year last December and he intends to use it. The dollar and European politics are the main euro drivers for now, in our view. Assuming no surprises in the European elections, we expect the euro to strengthen, particularly against the yen."

“Three points of focus for rates. Will the statement on rates staying ‘at current levels or lower’ be maintained? Will additional targeted longer-term refinancing operations be announced? Will there be more transparency on quantitative easing implementation?”

As for European politics, things were heating up with elections in the Netherlands on 15 March with far-right candidate Geert Wilders losing ground, while in France the latest Opinionway poll for the first round in April showed far-right candidate Marine Le Pen had lost a point, while centrist independent Emmanuel Macron and centre-right François Fillon had gained a point each.

Analysts at Rabobank said the movement in the polls showed that despite the legal controversy surrounding Fillon, "the race is far from over".

"But what is perhaps more remarkable is the fact that the news that Alain Juppé won’t run in this election has not driven the French-German 10 year yields spread back to the heady levels we saw in the second half of February. In that sense it seems the markets are not taking the good fortunes of Macron in the recent polls with the heap of salt that they deserve!”

In corporate news, Adidas gained 7.5% after the sportswear giant hiked its 2016 dividend following stronger-than-expected full year results and raised its earnings target.

Deutsche Post fell 2.02% despite the German parcel company reporting a 25% rise in fourth quarter profits and raised its dividend.

Credit Agricole was down 0.12% on news that France’s third-largest bank is considering selling its 31% stake in Banque Saudi Fransi which might raise $2.4bn.