Europe open: Stocks shrug off China weakness to edge higher

European equity markets edged higher in early trade, shaking off a weaker start and losses in Asia, as investors stepped in to pick up some stocks that were battered last week, despite ongoing concerns about the Chinese economy.

At 0855 GMT, the benchmark Stoxx Europe 600 index was up 0.5%, Germany’s DAX was 0.7% higher and France’s CAC 40 was 0.8% firmer.

Earlier on Monday, the People’s Bank of China guided the yuan higher, setting the mid-point fix at 6.5626 against the dollar.

“The prospect of a hard landing in China has increased global fears, but there may be budding signs that investors are starting to view the equity market as oversold, with European markets largely shrugging off the aggressive overnight falls in China,” said Rebecca O’Keeffe, head of investment at Interactive Investors.

“While this remains a very difficult market for investors, with fear rife, this could potentially prove to be a perfect buying opportunity for those who are willing to take the risk.”

Stocks in Asia were in the red again, extending last week’s heavy losses after muted inflation figures, as investors remained concerned about a slowdown in the world’s second-largest economy.

Data out at the weekend showed Chinese consumer inflation remained at 1.6 % last month, with producer prices 5.9% lower on the year.

China’s Shanghai Composite tumbled 5.3% while Hong Kong’s Hang Seng fell 2.8%.

In commodities, oil prices continued to slide, with subdued demand and a glut in supply weighing. West Texas Intermediate was down 2.3% to $32.40 a barrel while Brent crude was 2.8% lower at $32.62.

In corporate news, Air France-KLM was on the front after the airline operator said the terrorist attacks in Paris cost it €70m (£52m) in lost revenue, but added that bookings returned to normal in December.

In London, housebuilder Taylor Wimpey nudged a touch higher after reporting a strong year.