Europe open: Shares muted after US GDP data

European stocks hovered around the flatline on Friday as better-than-expected US GDP figures for the fourth quarter were tempered by data that showed domestic demand had slowed in the world's biggest economy.

The pan-regional Stoxx 600 index flitted between green and red at the opening, with major bourses in cautious mood.

Investor attention will turn to the release of US data on core inflation, personal income and spending and pending home sales. The US economy expanded by 2.9% year on year during the fourth quarter.

"The (GDP) number was boosted by consumer spending, but represents a slight slip from the third quarter reading. Indeed, with there being a time lag between interest rate hikes and the effect on the economy, it remains difficult to predict how much of the Federal Reserve’s actions so far are having the desired dampening effect," said Richard Hunter, head of markets at Interactive Investor.

"As such, more pessimistic investors are suggesting that the latest quarter of growth could be the last before previous hikes take full effect, potentially pushing the economy towards recession this Spring. The severity of the recession remains the key element of investor nervousness and, while one economic reading cannot in isolation predict a trend, the GDP number was enough to suggest that a mild recession could be on the cards, sending stocks higher for now."

"Next week will provide further colour, with a Fed policy meeting which is expected to result in a further 0.25% rate hike, and with a non-farm payroll release which could well confirm that the labour market remains tight."

In equity news, shares in H&M, the world's second-biggest fashion retailer, fell 7% reported a much larger dive than expected in September-November operating profit, slammed by soaring costs and weakening consumer confidence.

Sainsbury's shares topped the Stoxx after UK convenience store operator Bestway Group said it had taken a 3.45% stake in the famous British supermarket chain but was not planning a bid.

Outdoor recreational products maker Dometic fell after reporting challenging conditions in the fourth quarter.

Reporting by Frank Prenesti for Sharecast.com