Europe midday: Stocks waver ahead of Yellen speech

European stocks wavered on Tuesday, coming off earlier highs as the focus shifted to a speech from Federal Reserve Chair Janet Yellen later in the day and the key US jobs report at the end of the week.

At midday, the benchmark Stoxx Europe 600 index was up 0.2%, Germany’s DAX was flat and France’s CAC 40 was 0.5% firmer.

At the same time, oil prices were in the red. West Texas Intermediate was down 1.5% to $38.78 a barrel and Brent crude was off 1.8% at $39.54.

“A healthy start for the FTSE and European indices is already being eroded; we can take last night’s US session as the template for the week, namely limited gains and losses as quarter-end looms, with non-farm payrolls following on swiftly,” said Chris Beauchamp, senior market analyst at IG.

“Weakness in oil so far this morning carries on a pattern from last week – long positions in crude are now pushing to their highest levels in months, which may be a bearish sign. The short-covering is over, but the inventory build goes on, and this will dominate more and more as the new quarter gets underway. Equity inflows have been modest at best, indicating that the short squeeze has not been replaced by enthusiastic buying. Money may be on the sidelines, but it seems it is still not ready to enter the fray."

In corporate news, RSA Insurance was on the front foot on the back of a positive research note from Deutsche Bank, which upped its target price on the stock.

ENI was in the red after La Repubblica reported that the Italian energy company was discussing the sale of a 20% stake in Egypt's Zohr gas field to Russia's Lukoil.

Pharmaceuticals giants GlaxoSmithKline and AstraZeneca were both higher after drug approvals in Japan.

Low-cost carrier EasyJet flew higher after Bank of America Merrill Lynch upgraded the stock to ‘buy’.

On the downside, shares in AG Barr edged lower after the London-listed drinks maker posted a rise in full year profit but a dip in revenue.

Banco Popolare was weaker after its chief executive told Il Sole 24 Ore over the weekend that half the €1bn capital required for it to merge with Banca Popolare di Milano could be raised through a rights issue and the other half through direct placements to institutional investors.

Yellen’s speech at the Economic Club of New York Luncheon is due at 1620 GMT. Before that, S&P Case-Shiller house prices are at 1400 BST, while US consumer confidence is at 1500 BST.

Investors will be scrutinising Yellen’s words for any policy clues, particularly after the hawkish comments last week from Fed officials.

However, Societe Generale strategist Kit Juckes did not seem to think the speech would provide too many hints: “The danger is that she is very balanced/neutral. It’s hard to see why she would seek to signal the possibility of an imminent rate hike after recent data, but she will clearly want to support the market in pricing in hikes this year.

“Net result, she won’t be much help and we may wait for Friday for economic clues.”