Europe midday: Stocks waver, showing some resilience to China turmoil

At midday, the benchmark Stoxx Europe 600 index was down 0.1%, Germany’s DAX was up 0.4% and France’s CAC 40 was 0.3% 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 2.1% to $32.46 a barrel while Brent crude was 2.6% lower at $32.67.

Economic sentiment in the Eurozone worsened more than expected in January, according to the latest survey released by Frankfurt-based research group Sentix.

The index gauging economic confidence among investors slid to 9.6 from 15.7 in December, missing expectations for a reading of 12.2.

Meanwhile, the sub-index tracking expectations for the Eurozone’s economy over the next six months tumbled to 6.3 in January from 18 in December, while the index tracking Germany fell to 18.1 from 22.7.

The current situation index nudged down to 13 from 13.5 in December.

“This is a downbeat headline, but not unexpected given the atrocious start to the year for equities,” said Pantheon Macroeconomics.

“Fears over China’s devaluation—as an omen of a hard landing in the economy—and increased global deflation risks likely will linger in the short run.”

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.

Italian oil and gas industry contractor Saipem was a high riser following reports that it could be involved in the Russian Nord Stream 2 pipeline project.

In London, housebuilder Taylor Wimpey nudged a touch lower despite reporting a strong year.

Sage Group and Whitbread were standout gainers on the FTSE 100 after Bank of America Merrill Lynch upgraded its ratings on the stocks.