Europe midday: Stocks push lower amid worries about ECB tightening

European stocks fell on Wednesday amid growing concerns about possible monetary tightening by the European Central Bank.

At midday, the benchmark Stoxx Europe 600 index was down 1%, while Germany’s DAX and France’s CAC 40 were off 0.7%.

Meanwhile, oil prices were on the front foot after the American Petroleum Institute said on Tuesday that US crude inventories fell 7.6m barrels in the week ended 30 September, versus expectations for a 2m increase. West Texas Intermediate was up 1.8% at $49.55 a barrel and Brent crude was 1.9% firmer at $51.81.

Investors got their first chance to react to a press report after the close on Tuesday that the European Central Bank was reaching a consensus to start tapering its asset-buying programme.

According to Bloomberg, the ECB will start winding down the asset purchases ahead of the programme’s end in March next year.

The ECB later denied that the issue had been discussed.

In addition, market participants were still digesting comments by Richmond Fed President Jeffrey Lacker who said on Tuesday that he would have voted in favour of an interest rate hike at the September policy meeting if he had been able to vote.

"I would have dissented," Lacker told reporters in Charleston, West Virginia, where he gave a speech on the economic outlook.

The Fed last month decided to keep rates at between 0.25% and 0.50% as it waits for further evidence of improvement in inflation and the economy. The central bank indicated that it expects one rate increase this year.

Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, said: “European equity markets are on the back foot as concerns grow that central banks are going to pare back accommodative policy - with the ECB potentially tapering bond purchases and previously dovish Fed members ramping up expectations of an interest rate rise this year.

“Both equity and bond market valuations have been founded on monetary support from global central banks and have arguably become hooked on quantitative easing and low interest rates. The possibility of central banks returning to a more normal regime could see taper tantrums resume, volatility spike and investors flee.”

In corporate news, Tesco surged after reporting much-improved sales and operating profits in the first half of the year, though its pension deficit has grown to a whopping £6bn due to lower bond yields.

BHP Billiton pushed higher as it talked up the opportunities within its petroleum business during an investor briefing.

On the downside, Air Liquide fell after saying it has begun exclusive talks to sell its scuba-diving equipment making unit Aqua Lung to Montagu Private Equity.

On the data front, Markit’s final eurozone composite output index printed at 52.6 in September, in line with the flash estimate but down from August’s reading of 52.9.

Meanwhile, the final eurozone services business activity index came in at 52.2, a touch higher than the flash estimate of 52.1 but down from 52.8 in August.

In terms of sectors, output rose at manufacturers and service providers. The rate of expansion in manufacturing production ticked higher and remained above that for service sector business activity for the fourth straight month. Services output growth dipped to a 21-month low.

Meanwhile, separate data from Eurostat showed retail sales dipped 0.1% from July, beating expectations of a 0.3% decline. On the year, however, they were up 0.6%, missing forecasts of a 1.5% increase.

Eurostat said eurozone retail sales in July rose 0.3%, which was down from an initial estimate of a 1.1% increase. The figure for the year was also revised down, to a 1.8% gain from 2.9%.