Europe open: US corporate results, caution weigh on indices

European equities started of the session with moderate losses, weighed down by poor corporate results out overnight in the States and with speculation of further easing by the Bank of Japan underlining the 'defensive' moves seen of late by many major central banks to try and stem deflationary forces and kick-start activity.

As of 08:30 the benchmark DJ Stoxx 600 was 0.48% or 1.76 points lower to 347.90, the Dax off by 0.50% or 52.60 at 10.383.13 and the Cac-40 declining 0.40% or 18.44 at 4,560.57.

"While there’s clearly some negativity coming from the US and Asian sessions overnight, driven primarily by some disappointing earnings from the former (Alphabet, Microsoft, Visa, Starbucks), I think there’s probably also some profit taking going on, given the levels we’re now back at," Craig Erlam, senior market analyst at Oanda said in a research note sent to clients.

Overnight on Friday, Bloomberg reported that the Bank of Japan might offer negative rates on its so-called stimulative lending facility which were currently at 0%, citing "people familiar with the matter", in a bid to help offset further reductions in its main policy interest rates into negative territory. That sent the dollar/yen 0.98% higher to 110.54.

Adding to the downbeat mood, Markit's composite purchasing managers' index for April dipped from a reading of 54.0 in March to 53.8, a nine-month low, as a gauge of service sector activity weighed.

The 'flash' manufacturing PMI for the euro area's largest economy - arguably the most important of the two - improved from a reading of 50.0 to 51.9 (consensus: 50.7).

Oliver Kolodseike, Economist at Markit, said: “The German private sector economy is continuing its unspectacular expansionary trend at the beginning of the second quarter. Although growth remained uninspiring and the headline PMI dropped to a nine-month low, the index was down only fractionally since March and is still indicative of modest growth."

On a more positive note, manufacturing had come out of two consecutive months of stagnation, he added, and "it seems as if deflationary pressures are beginning to out, with input costs falling only marginally and output prices rising. This development should provide some modest cheer to Eurozone policy makers after the currency union’s official CPI measure showed that prices were unchanged in March.”

Euro/dollar was drifting lower 0.12% to 1.1274.

France's composite PMI edged higher from a reading of 50.0 to 50.5.

"Activity in the French private sector firmed slightly at the start of the second quarter, but services are doing the heavy lifting. The manufacturing PMI fell, consistent with the euro now acting as a slight drag on industrial firms’ profitability," Pantheon Macroeconomics said in a reserach note sent to clients.

The automobiles&parts sector was acting as the main drag on European indices on Friday morning, with the DJ Stoxx 600 sector gauge down 2.20% to 501.27 after Daimler disclosed the US Department of Justice was conducting a probe into its emissions certification process.

The carmaker's shares fell 4.58% to €63.61 having also reported its latest first quarter results.

Zodia Aerospace was the biggest gainer on the Pan-European Stoxx 600, rocketing 12.24% to €21.41 on reports that French rival Safran might be studying an offer to take out the aerospace supplier, whose shares had been pumelled after delivering eight warnings over the last six months.

Swedish truck maker SSAB lifted its forecast for the continent's truck market, although it turned more pessimistic on North America and Brazil.

Spain's Banco Sabadell saw first quarter net profits jump 44% following its acquisition of UK rival TSB.