Europe midday: Stocks mostly down despite encouraging EC sentiment survey

European stocks were mostly in the red by noon on Thursday with a positive survey on eurozone economic confidence failing to coax all but Germany's equity benchmark onto the front foot, after mixed signals from the Federal Reserve overnight and ahead of Japan's stimulus decision on Friday.

The European Commission’s eurozone economic confidence index rose to 104.6 in July from 104.4 in June. It surprised analysts who had estimated a decline to 103.6 following the UK’s decision to leave the European Union.

Economist Claus Vistesen at Pantheon Macroeconomics said the survey indicated that uncertainty over the UK referendum has not been a major hit to the continental economy.

“Overall, this survey chimes with other business surveys for July which shows a limited impact in the euro area, from the elevated uncertainty in the wake of the Brexit vote…so far at least.”

He noted that the headline index has been overestimating eurozone GDP growth recently, but broadly points to stable growth in the short run.

But BNP Paribas economists said while they were surprised by July’s data, they continue to think "it is too early to conclude that Brexit will have little impact on the eurozone".

The euro lost some of its earlier strength against the dollar but was still 0.24% higher at 1.1084, and gained further on the pound as the day progressed to 0.84246 at midday

Also giving German equities a lift was news that domestic unemployment in June came in slightly better than expected, helping lift the Dax. Die Arbeitslosigkeit fell 7,000 in July, more than the 4,000 drop expected by economists, with the jobless rate remained at 6.1%, as forecast.

Later, at 1300 BST, German Consumer Price Inflation (CPI) is due, while committee members of the European Central Bank (ECB) Carlos Costa and Benoît Coeure are both due to speak.

Stateside, traders will watch out for the Kansas City Fed Manufacturing emulating its Dallas and Richmond Fed counterparts with a bigger than expected July rebound this week.

In corporate news, French advertising group JCDecaux revealed plans to reduce investments in the UK following the Brexit vote. Co-chief executive Jean-Charles Decaux said on Thursday that it would review current plans to install 1,000 84-inch screens across London bus shelters in major shopping areas due to the referendum decision. Its shares were down on the day.

But down even more was Italian oil contractor Saipem, which slumped after cutting its guidance due to delays in clients awarding contracts.

Spain's Telefonica reported lower second-quarter earnings as the continuing recovery in its domestic telecoms business was offset by declining currencies in Latin America. Operating income fell 7% to €3.92bn, short of €3.9bn forecasts.

Smith & Nephew led the UK's larger fallers after reporting a drop in first half pre-tax profit and trading profits, hit by currency headwinds.

Royal Dutch Shell shares slid as it reported a sharp fall in second quarter earnings, blaming weak oil prices.