Europe midday: Tech paces losses as US earnings season gets underway

Stocks in Europe are holding lower despite news of a positive start to the US second-quarter corporate reporting season.

Weighing on the mood, overnight authorities in the state of California, one of the largest in the US, reversed the opening of bars and restaurants in response to the growing number of novel coronavirus infections.

That, said Michael Hewson at CMC Markets UK, was feeding investors' concerns around the strength of any recovery in the US economy.

Just the day before, equity strategists at JP Morgan had warned that any positive surprise in second quarter earnings could prove short-lived, precisely for that same reason.

As of 1255 BST, the pan-European Stoxx 600 was trading 1.04% lower to 366.66, led by a 2.94% decline in Technology issues, mimicking the losses seen in their US counterparts on Monday night.

Shares of software developer Nemetschek, chip-maker Infineon, Sartorius Stedim Biotech, computer peripherals manufacturer Logitech and Bechtle were all at the bottom of the Stoxx 600 leaderboard.

Germany's Dax meanwhile was off by 1.21% at 12,645.23, although Milan's FTSE Mibtel was faring slightly better, trading down 0.72% to 19,858.88.

Dragging on investor sentiment too, the latest economic news from overseas was rather mixed.

Chinese foreign trade data for June printed came in ahead of economists' forecasts, but a reading on UK gross domestic product for May printed well below forecasts due to the drag from lockdown measures on activity in services.

On the positive side of the ledger, the ZEW institute's economic confidence gauge for the Eurozone rose by 1.0 point in July to reach 59.6, marking its fifth consecutive monthly increase and its highest reading since May 2015.

Nonetheless, Tomas Dvorak at Oxford Economics said: "Going forward, we expect the pace of the recovery to soften after the initial bounce-back, as weak external demand, supply chain disruptions and limited operating capacity will weigh on the industrial sector.

"We expect the industrial production to only reach in 2019 Q4 level by the end of next year."

As for the European Central Bank's second quarter bank lending survey, Capital Economics judged that it pointed to tighter credit in the third quarter, "but by nowhere near as much as during the global financial crisis.

"This should mean that the banking sector is not likely to hold back the recovery in the way that it did after 2008."