Europe midday: Stocks pare early gains as rally fades

European stock markets pared earlier gains by Tuesday lunchtime as the Stoxx 600's five-day winning streak began to lose steam.

After rising initially, the Stoxx 600 was flat at 514.54 by 1258 CEDT, having risen 3.1% over the past five trading sessions.

Rising hopes of monetary easing have driven global equities higher over the past week or so, with Wall Street benchmarks S&P 500 and Nasdaq putting in their best string of positive performances (eight) so far this year.

The Federal Reserve is widely expected to start cutting interest rates at its next meeting in September, though investors are now choosing to scale back risk appetite until they hear from Fed chair Jerome Powell at this week's Jackson Hole symposium on Friday.

"All eyes and ears are tuned in, eagerly waiting to see if he’ll give a wink of confirmation to the current market pricing. The market is positioning his remarks to be more consequential than usual, hoping for a dovish signal that sets the stage for the FOMC to cut in September," said Stephen Innes, managing partner at SPI Asset Management.

Back on this side of the Pond, Sweden's central bank, the Riksbank, slashed interest rates for the second time this year on Tuesday, and indicated that "two or three more" cuts could happen this year if the inflation outlook remains the same. The Riksbank trimmed its key policy rate from 3.75% to 3.5%, as expected by the market.

Meanwhile, the People's Bank of China kept its benchmark lending rates unchanged on Tuesday, in line with market expectations. China's one-year loan prime rate was kept at 3.35%, while its five-year LPR was unchanged at 3.85%, a month after it surprised markets by cutting major short and long-term interest rates in July.

In economic data, core inflation in the eurozone officially held steady for the third straight month in July, according to final estimates published by Eurostat. The core harmonised index of consumer prices came in at 2.9% year-on-year last month, in line with preliminary data released two weeks ago and matching the inflation rate of both May and June.

Construction output in the eurozone bounced back strongly in June after contracting the previous three months. Output increased by 1.7% over the month of June, following a 0.9% drop in May and 0.3% monthly declines in both April and March. This was the highest rate of growth since January 2023.

In Germany, wholesale price deflation eased to its lowest level in 13 months, in line with economists' predictions. The producer price index fell at a year-on-year rate of 0.8% in July, Destatis reported. While this was the 13th consecutive month of falling prices, the deflation rate halved from the previous month (-1.6%) and was the lowest level since July 2023.

Market movers

BT Group slumped in London after competitor CityFibre announced a long-term broadband partnership with Sky. Under the new agreement, Sky will offer its broadband to people on CityFibre’s nationwide full fibre network.

European chip names were performing well as global financial markets gear up for the latest earnings report from titan Nvidia next week, with the US stock rising strongly the previous evening. M&A activity in the sector was also helping sentiment after AMD bought server maker ZT Systems for $4.9bn. ASML Holdings, ASM International and BE Semiconductor Industries were all putting in decent gains.

Danish biotech group Genmab was under the weather after JPMorgan analysts downgraded the stock from 'overweight' to 'neutral' and placed it on their negative catalyst watch list, citing "significant downside" to current consensus forecasts.