Europe midday: Stocks on the back foot

European stocks fell as investors looked ahead to a busy week on the corporate front and the European Central Bank rate announcement on Thursday, with the dollar steady at a seven-month high.

At midday, the benchmark Stoxx Europe 600 index was down 0.6%, while Germany’s DAX and France’s CAC 40 were 0.5% lower.

Accendo Markets research analyst Henry Croft said: “European markets are expected to remain cautious in the run up to Thursday’s meeting of European Central Bank policy makers as US Q3 earnings releases continue after a strong showing from heavyweight financials JP Morgan and Citibank on Friday.”

Meanwhile, oil prices were steady to a little lower after Baker Hughes data showed the number of active oil rigs in the US last week rose by four to 432. West Texas Intermediate was down 0.2% to $50.23 a barrel and Brent crude was flat at $51.93.

On Friday, Federal Reserve chair Yellen said in a speech that policymakers need to consider the potential for a “high pressure economy” and let inflation continue to rise. Her comments boosted the dollar, which hit its highest level since March.

FXTM research analyst Lukman Otunuga said: “Markets digested the comments as slightly dovish with discussions of the central bank potentially adopting an accommodative policy for longer periods triggering some dollar weakness. Yellen’s speech failed to provide additional clarity on US rate hike timings this year consequently forcing investors to refocus on September’s firm retail sales figure of 0.6%. It seems that bulls exploited the instance of weakness in the greenback to send prices higher after the retail sales reinforced expectations over the Federal Reserve raising US rates in December.”

In corporate news, Banco Popolare and Banco Popolare di Milano were in focus after shareholders approved a merger between the two.

Swedish retailer Hennes & Mauritz nudged lower after it reported a 1% increase in sales in September.

Education publisher Pearson was under the cosh after it reported a drop in underlying sales for the nine months to the end of September.

Automotive supplier Continental AG was trading flat after agreeing to buy rival Konrad Hornschurch.

On the data front, inflation in the eurozone was confirmed at 0.4% for September, up from 0.2% in August and in line with expectations, according to figures from Eurostat.

Year-on-year inflation also came in at 0.4%, as forecast.

Excluding energy and unprocessed food items, eurozone prices rose 0.4% on the month and 0.8% on the year.

For the European Union, inflation was also 0.4%, up from 0.3% the month before.

The biggest upward impacts to eurozone annual inflation came from restaurants and cafes and rents and tobacco, while fuels for transport, gas and heating oil had the biggest downward impact.

Still to come, investors will eye Empire State manufacturing and industrial production are at 1330 BST and 1415 BST, respectively.

Markus Huber, a trader at City of London Markets, said: “According to the most recent FOMC minutes a rate US rate hike appears to be rather imminent, therefore traders are watching each piece of new economic data especially closely as any pick-up in economic activity would go a long way to persuade the Fed to pull the trigger again.”