Europe midday: Stocks turn lower as airlines slump; ECB eyed

European equity markets reversed opening gains to trade a little lower as airline stocks slumped and investors eyed the European Central Bank’s latest rate announcement.

At midday, the benchmark Stoxx Europe 600 index was down 0.2%, France’s CAC 40 was 0.3% weaker and Germany’s DAX was flat.

At the same time, oil prices were in the black. West Texas Intermediate was up 0.5% at $45.96 a barrel and Brent crude was 0.5% higher at $47.39.

Investors were looking ahead to the ECB rate announcement at 1245 BST and press conference at 1330 BST, with the deposit rate expected to remain in negative territory at -0.4% and the main interest rate unchanged at 0.00%.

Ana Thaker, market economist at PhillipCapital UK, said: “Much like the Bank of England, the ECB is likely to wait for post-Brexit data to be released before making any significant policy decisions with inflation, production and employment data crucial. Draghi will want to reassure markets that the bank remains in a stable position to provide the necessary assistance to markets and are ready to act when required.

“Whilst markets have previously believed and taken comfort in Draghi’s words, it is increasingly apparent that the ECB is running out of policy measures to tackle stagnant growth in the area; it will be interesting to see if they keep faith in him today.”

Airlines weighed on sentiment on Thursday, with EasyJet and Deutsche Lufthansa both firmly under the cosh.

EasyJet posted a drop in revenue per seat and total revenue for the third quarter amid difficult trading that was hit by the terror attack in Brussels and the Egyptair tragedy and said the outlook was uncertain.

Meanwhile, Lufthansa downgraded its profit forecast for this year as terror attacks hit bookings.

Delhaize edged lower as the Belgian retailer said second-quarter revenue rose 4.3%.

On the upside, brewer SABMiller nudged higher after it said the US Department of Justice has given its clearance on the company’s proposed combination with AB InBev.

Unilever was a touch higher after saying it maintained its underlying rate of sales growth at 4.7% in the second quarter but first-half turnover fell.

French luxury goods maker Hermes gained after its second-quarter sales surpassed expectations.

Also on Thursday, market participants were reacting to comments from Bank of Japan governor Haruhiko Kuroda, who dismissed the use of ‘helicopter money’ as stimulus to tackle inflation.

"I don't think at this stage we should abandon this institutional setting. No need and no possibility for helicopter money," Kuroda said in a BBC radio interview.

"We have very powerful policy framework, and I don't think there's any significant limitation of further easing of monetary conditions in Japan, if necessary."