Europe midday: Stocks pare losses after PBoC, Eurozone inflation

European stocks came off earlier lows as disappointment over the outcome of the G20 meeting in Shanghai was partially offset by hopes of more stimulus from the European Central Bank and a cut to the reserve requirement ratio in China.

At midday, the benchmark Stoxx Europe 600 index was down 0.5%, Germany’s DAX was 1.1% lower and France’s CAC was off 0.3%.

At the same time, oil prices were mixed, with West Texas Intermediate down 0.3% to $32.67 a barrel and Brent crude up 0.7% at $35.33.

Stocks had been deeper in the red at the start of the day as investors were left disappointed that the G20 meeting did not result in a coordinated stimulus effort to bolster global growth.

However, European indices pared losses after the People's Bank of China cut its reserve requirement ratio by 50 basis points, in a move to pump liquidity into its stuttering economy.

Cutting the reserve ratio frees up capital by lowering the amount of back-up funds banks must hold with the central bank, a move the PBOC has now made five times since November 2014.

The central bank said the new cut would be effective from 1 March and was aimed at providing banks with ample liquidity and keeping credit growth stable.

Meanwhile, investors digested news that Eurozone inflation turned negative in February, raising expectations that the European Central Bank will implement further stimulus measures at its meeting on 10 March.

According to figures released by Eurostat, consumer prices in the euro bloc fell 0.2% in the year to February, down from 0.3% in January. Economists had been expecting it to drop to zero.

Meanwhile, the core rate of inflation, which strips energy, food, alcohol and tobacco, dropped to 0.7% from 1%.

The ECB is targeting inflation of just below 2%.

“Pressure on the ECB to deliver, therefore, has intensified today ahead of the bank's policy meeting next week. We expect a 20bp deposit-rate cut, accompanied by tiering, the monthly run-rate of asset purchases to rise by €10bn, together with a further extension of the reference date to September 2017,” said Gizem Kara, senior European economist at BNP Paribas.

In corporate news, Barclays was lower after saying it was evaluating strategic options for its African business following reports the bank has decided to exit operations there.

AstraZeneca was on the back foot after saying it has entered a licensing deal with China Medical System Holdings for the commercialisation rights in China to its hypertension medicine Plendil.

Standard Chartered was under the cosh after Bernstein cut the price target on its Hong Kong listed stock, while HSBC also slumped after Bernstein trimmed its price target.

Roche Holding was in the red after it said studies for one of its asthma drugs did not come to conclusive results.

On the upside, supermarket retailer Morrisons rallied after announcing that it has inked a supply agreement with Amazon.com that will mean hundreds of its products will be available to Amazon Prime Now and Amazon Pantry customers in the coming months.

Bunzl nudged a touch higher as the outsourcer posted a rise in 2015 profit and revenue.

Still to come on the data front, Chicago PMI is at 1445 GMT while US pending home sales are at 1500 GMT.