Europe midday: Shares slip into red on Middle East tensions

(Sharecast News) - European shares fell into the red on Wednesday as Middle East tensions were ratcheted up after the assassination of the Hamas deputy leader Saleh al-Arouri in Lebanon, raising fears of retaliation by the Islamic group Hezbollah against Israel. The pan-regional Stoxx 600 index was down 0.80% at 474.68 in early deals with most Continental bourses higher. Sentiment was also dented by warnings from retailers that attacks on shipping in the Red Sea and Suez Canal by Yemeni Houthi militants would push prices up, and prolong inflationary pressures for consumers.

"Middle East tensions could be a big spanner in the works for any hope that the Bank of England might start tinkering early with interest rates," said Hargreaves Lansdown analyst Susannah Streeter.

"Caution has returned, as investors have begun to re-assess the prospects for interest rates and just how resilient economies will be over the months to come."

Meanwhile, the British Retail Consortium warned this could have knock-on effects on product availability and prices. Chief executive Helen Dickinson said this was "as a result of higher transportation and shipping insurance costs".

Investors will also be eyeing minutes of December's US Federal Reserve policy meeting later on Wednesday for any clues on when interest rates might be cut.

In economic news, unemployment rose at a slower-than-anticipated rate in Germany during December, according to the Federal Employment Agency, while the annual unemployment rate was one of the lowest since German reunification.

Data showed the number of people out of work increased by 5,000 in seasonally adjusted terms to 2.7m, better than the 20,000 increase expected by economists. The seasonally adjusted jobless rate grew slightly to 5.9%.

In equity news, shares in Atos surged as French aerospace giant Airbus said it was in early discussions to purchase the IT group's data and cyber business for up to €1.8bn.

Danish shipping giant Maersk continued to rally as it said it would suspend sailings through the Suez Canal.

Ryanair shares fell as the budget airline reported a 9% jump in December passenger numbers, but warned that the removal of its flights from online travel agents will dent short-term load factors and soften short-term yields.

Reporting by Frank Prenesti for Sharecast.com