Europe open: Stocks waver as Fed remains in focus; VW skids

European stocks wavered in early trade as the timing of the next rate hike by the Federal Reserve remained a key question on investors’ minds.

At 0855 BST, the benchmark Stoxx Europe 600 index was up 0.1%, while Germany’s DAX and France’s CAC 40 were flat.

At the same time, oil prices were mixed as the production of Canadian oil resumed and investors looked ahead to this Thursday’s meeting of the Organization of the Petroleum Exporting Countries. West Texas Intermediate was up 0.5% at $49.57 a barrel while Brent crude was down 0.3% at $49.63.

Morgan Stanley said the OPEC meeting was unlikely to end in anything other than a statement of support for the current condition of oil markets.

“Renewed faith in the strategy and higher prices work against intervention, as do personnel changes and recent policy failures. Many OPEC members also have plans to grow, so cutting supply now may interfere with those objectives. That said, low expectations and limited positioning ahead of the meeting do suggest that any surprise could have an outsized impact,” the bank said.

Investors in the UK got their first chance to react to the latest comments by Federal Reserve Chair Janet Yellen, who said on Friday that a rate hike in the coming months “would be appropriate” if the economy and labour market continue to show an improvement.

“No doubt much of the general talk impacting market action is still about a US rate hike either in June or July. However traders are not only increasingly confident that the US economy is strong enough to withstand another hike but also that the Fed won't pull the trigger if this would mean that the US economy is being put at risk,” said Markus Huber, a trader at City of London Markets.

“Trading volume should be on the light side as not all traders will be back in the markets in the aftermath of public holidays in the US and the UK yesterday.”

Corporate news was thin on the group.

German car maker Volkswagen skidded after posting a 20% drop in first-quarter profit.

French car maker Peugeot Citroen was in focus following a report the Peugeot family is planning to hold talks with the French government to discuss the future of its stake in the company.

In London, shares in IG Group rallied after the spreadbetting firm said it expects earnings for the year to be slightly ahead of views after a solid fourth quarter.

Earlier, data from Destatis showed German retail sales unexpectedly fell in April.

Retail sales were down 0.9% on the month, versus expectations for a 0.9% increase. Still, this was better than the 1.4% drop seen in March.

On the year, retail sales were up 2.3%, beating economists’ expectations of a 1.9% jump.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said the data was poor, with growth slowing rapidly.

“A downbeat headline, which indicates that the poor ending to the first quarter for German consumers’ spending continued in the beginning of Q2. With retail sales down 2.3% in the last two months, though, a rebound in May and June is a good bet,” it said.

Still to come on the data front, Eurozone inflation figures and the unemployment rate for the bloc are at 1000 BST.