Europe open: Stocks flat as investors pause for breath

European stocks were little changed in early trade, with investors pausing for breath following strong gains in the previous session as the focus shifted to a speech by Federal Reserve Chair Janet Yellen.

At 0900 BST, the benchmark Stoxx Europe 600 index and France’s CAC 40 were both down 0.1%, while Germany’s DAX was flat.

Stocks racked up strong gains on Monday as investors reacted to the latest EU referendum polls, which showed a swing in favour of the Remain camp.

At the same time, oil prices retreated, with West Texas Intermediate and Brent crude down 0.7% at $49.05 and $50.31 a barrel, respectively.

As well as the referendum, investors were looking ahead to Fed chair Janet Yellen’s semi-annual congressional testimony at 1500 BST. She will also be speaking on Wednesday.

David Morrison, senior market strategist at SpreadCo, said Yellen will face questions from both sets of committee members which may cover areas of monetary policy she’d rather not answer.

“The Fed Chair came in for a load of criticism recently when she gave a garbled response when asked about the Fed’s credibility. She may get picked up on this over the next couple of days,” he said.

Last week saw the central bank keep monetary policy unchanged while lowering its economic growth forecasts for 2016 and 2017. In the subsequent press conference, Yellen cited weaker employment data together with concerns over the possibility of a Brexit as reasons for keeping rates unchanged.

“The Fed Chair will still be able to use the UK referendum as cover for the central bank’s unwillingness to hike rates. However, there may be some issues which she will find more difficult to duck,” said Morrison. “High amongst these may be the constant flip-flopping on rate expectations from members of the Federal Reserve.”

In corporate news, Whitbread rallied after reporting an improvement in sales in the first quarter as its Costa coffee shops bounced back from a slowdown in the preceding few months.

BHP Billiton was a little lower after saying it was targeting another $600m in coal production costs by the end of the 2017 financial year.

Rio Tinto was also in the red after announcing an organisational structure reshuffle.

Germany’s Kion Group was under the cosh after the supplier of forklift trucks and warehouse equipment said it was buying US logistics company Dematic Corp for around $2.1bn.