Europe open: Markets higher but gains limited after recent rally

European stocks were struggling for direction on Monday morning as investors chose to keep their powder dry following some strong gains last week.

The pan-European Stoxx 600 index was up just 0.1% in early deals, with most major markets across the continent trading within a tight range of 0% to 0.2%. That follows a 3.1% rise in the Stoxx 600 over the past five trading sessions after hitting a ten-month low on 27 October.

Richard Hunter, head of markets at Interactive Investor, said: “A rally on Friday capped a strong week for markets, as investors became increasingly convinced that the interest rate hiking cycle is over."

In economic data on Monday, Germany factory orders unexpectedly rose 0.2% in September, surprising analysts who had pencilled in a 1% decline. However, a substantial downward revisions to August's increase, from 3.9% to just 1.9%, points to a bleak outlook for manufacturing.

A separate data release for turnover data suggests that production (excluding construction) fell in September, which could result in worse-than-expected figures on industrial production out on Tuesday. "As such a downward revision to GDP growth is now in the cards too," said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.

The S&P Global and Hamburg Commercial Bank (HCOB) composite Eurozone purchasing managers' index (PMI) is due out at 0900 CET, while the S&P Global/CIPS UK construction PMI will be released at 0930 CET.

The economic data calendar will pick up later in the week, with Chinese trade figures and Eurozone producer price inflation on Tuesday, Germany inflation on Eurozone retail sales on Wednesday, Chinese inflation on Thursday and UK GDP numbers on Friday.

In company news, Ryanair was performing well on the newsit will pay its first ever dividend, as it posted a jump in first-half profit thanks to record summer traffic and higher fares. In the six months to the end of September, profit after tax rose 59% to €2.18bn, with revenues 30% higher at €8.58bn. TUI, Deutsche Lufthansa, Air-France KLM and easyJet shares were also higher.

Telecom Italia was lower after agreeing to offload its landline business to US private equity group KKR for €22bn.

Aerospace group Melrose gained on the announcement that it has signed a new $5bn aftermarket services agreement with engines giant GE Aerospace.

Insurance company Prudential fell after new business sales and profit growth slowed slightly in the third quarter.