Europe midday: Stocks lower after Eurozone inflation fell more than expected

European stocks were trading lower on Friday after data revealed that eurozone inflation fell more than expected in March.

At midday, the benchmark Stoxx Europe 600 index fell 0.32% to 379.26, Germany’s DAX was flat at 12,248.02 and France’s CAC was down 0.32% to 5,073.43.

Eurozone inflation fell to 1.5% year-over-year in March from 2% in February, driven by decline in energy and food prices, and more than the 1.8% fall expected.

The core rate dropped to 0.7% from 0.9%, its lowest level since April 2016.

This is likely to strengthen the European Central Bank’s policy to continue with stimulus measures. Investors had priced in a rate hike at around December following a hawkish comments at the ECB’s March meeting, however some central bank officials told Reuters, that they were over-interpreted and that they will continue with loose monetary policies.

The ECB's quantative easing programme contains monthly asset purchases of €60bn until December, tapering from January 2018 and a first rate hike in September 2019.

Florian Hense, an economist at Berenberg, said that the market’s recent excitement about inflation risks in the eurozone were premature.

"The recovery in the eurozone is some two years behind the US and UK. Despite major improvements since its peak in 2013 at 12.1%, the unemployment rate remains high at 9.6% ... At least part of the eurozone’s current improving growth is due to the ECB’s accommodative monetary stance. As long as underlying inflationary pressure remains low, the ECB can keep its monetary policy accommodative, and has no reason to alter its policy path", he said.

In other economic data, Germany’s unemployment rate unexpectedly fell to 5.8% in March, while French consumer spending declined 0.8% in February, compared to the 0.1% rise expected.

Elsewhere, the European Union rejected parallel talks on Britain leaving the bloc and forming a free trade agreement.

European Council President Donald Tusk said that Britain would also have to honour its commitment and liabilities to the EU before it leaves, which is thought to be around €60bn.

Meanwhile, oil prices retreated, with Brent crude down 0.87% to $52.50 per barrel and West Texas Intermediate off 0.62% to $50.04.

In currency markets, the euro was flat versus the dollar to 1.0676 and up 0.16% against the pound to 0.85756.

In corporate news, German steel producer Salzgitter fell 1.09% after the US Department of Commerce ruled that some foreign firms had 'dumped' carbon and alloy steel products in the US, opening the way for it to slap duties on them ranging from between 3.62% to 148%.

Danone slipped 0.61% after the French dairy firm said it would sell its US subsidiary Stonyfield in order to buy Whitewave Foods.