Europe midday: Stocks slip as resources take a hit from China data

European stocks slipped into the red on Tuesday, unable to hold on to opening gains as weakness in the basic resources sector offset some upbeat corporate releases.

At midday, the benchmark Stoxx Europe 600 index and Germany’s DAX were down 0.2%, while France’s CAC 40 was 0.4% lower.

Portugal’s PSI 20 suffered the heaviest losses, down 1.1% amid ongoing political uncertainty, with anti-austerity parties looking set to form the next government.

“Markets lost some momentum heading into the US jobs report and have failed to pick up the pace since,” said Jasper Lawler, market analyst at CMC Markets.

“The strong US labour market data has pushed the odds of a December rate hike above 70% but data from around the world suggests a hike would be in a an environment of low global inflation and slowing growth.”

Miners, which are heavily dependent on demand from China, were under the cosh after data released by the National Bureau of Statistics earlier showed Chinese consumer prices rose only 1.3% in the year to October.

This was down from 1.6% in September, marked the lowest reading since May and fell short of expectations of 1.5%.

A downgrade of the European mining sector to ‘neutral’ from ‘positive’ also weighed, as Barclays pointed out that the last five years have marked the worst performance since 1966 and said it’s hard to see what might pull the sector out of its tailspin.

“A demand shock seems unlikely given the state of China’s economy, although there are some signs of near term improvement,” the bank said.

In corporate news, Vodafone rallied after its first half results beat expectations and the company lifted full year guidance.

ITV rose after the broadcaster said it was on track for double digit growth in full year profit as it posted a strong third quarter book.

National Grid gained ground after it announced strong first half earnings growth and confirmed rumours that it has begun to look at potentially selling a majority stake in its gas distribution business and returning the proceeds to shareholders via a likely special dividend.

On the downside, plumbing supplier Wolseley fell after its first quarter update failed to impress, while property developer Land Securities was also in the red as its interim net asset value per share fell short of expectations.

Supermarket retailers Morrison and Tesco were under the cosh after Deutsche Bank downgraded its ratings on the stocks.

Vallourec slid after the French steel pipe maker posted a third quarter loss amid falling demand from its oil and gas customers and said it does not not expect market conditions to improve any time soon.

There are no major Eurozone data releases due but in the US, the import price index is at 1330 GMT, while wholesale inventories are at 1500 GMT.