Europe midday: Stocks struggle for direction with US markets closed

(Sharecast News) - European stocks were putting in a mixed performance on Thursday despite business activity data from across the continent coming in ahead of expectations, with trading volumes expected to be low as US markets close for Thanksgiving. The Stoxx 600 index was up just 0.1% by 1248 CET, with mild losses in London and Milan outweighed by moderate gains elsewhere.

Despite the absence of activity on Wall Street - with US markets only opening for a half day on Friday too - the Thanksgiving holiday "paves the way for a busy end to the week", according to analyst Joshua Mahony, "with Black Friday bringing potential volatility for retail names".

Mahony explained: "The third-quarter earnings season saw a number of retailers warn of a potentially difficult fourth quarter, and traders will therefore be on the lookout for insights from payment providers and retailers over spending levels for this key weekend."

Oil prices were firmly lower with Brent crude down a further 1.1% on Thursday at $81.04 a barrel by 1230 CET, continuing its descent after exceeding $95 briefly in late-September. Oil tumbled on Wednesday after OPEC+ delayed a meeting by a week to 30 November with rumours that member countries were not aligned on current production. According to Bloomberg, Saudi Arabia has expressed "dissatisfaction" with output levels of other members.

In other news, Sweden's central bank kept interest rates unchanged on Thursday. The Riksbank announced that it was maintaining its key policy rate at 4.0%, surprising analysts who had expected a rise to 4.25%. However, it stressed that policymakers were prepared to raise rates further "if the prospects for inflation deteriorate".

Don't call it a comeback

Purchasing managers' indices (PMIs) were in focus during the morning session, and mostly came in better than forecasts. The S&P Global/HCOB composite PMI for the eurozone rose to a two-month high of 47.1, up from 46.5 in October. This was better than the consensus estimate of 46.9 but still firmly below the 50-point level which separates growth from contraction, showing the business activity in the region was still falling.

While the services and manufacturing PMIs surprised to the upside, both remained well below 50, with manufacturing output in particular contracting for the eighth month straight. Meanwhile, data from the region's two largest economies, France and Germany, painted a mixed picture: German numbers beat forecasts across the board while French figures disappointed.

Commenting on the data, HCOB's chief economist Cyrus de la Rubia said the eurozone economy is "stuck in the mud". De la Rubia said: "Over the last four to five months, the manufacturing and services sectors have both been experiencing a relatively constant contraction pace. Considering the flash PMI numbers for November in our nowcast model indicates the potential for a second consecutive quarter of shrinking GDP. This would align with the commonly accepted criterion for a technical recession."

Over in the UK, the S&P Global/CIPS composite PMI for November jumped to 50.1 from 48.7 last month, with the services sector returning to growth alongside a softer downturn in manufacturing. Analysts were expecting no change in the composite reading.

Martin Beck, chief economic advisor to the EY ITEM Club, said the figures suggest the UK economy will "flatline" in the fourth quarter and struggle to grow. Nevertheless, he said: "This is likely to reinforce the Bank of England's view that interest rates will have to remain at current restrictive levels for some time, although the EY ITEM Club continues to think that inflation will fall faster, and rates will be cut earlier, than the consensus currently expects."

Stock movements

London-listed mining giant Anglo American was in demand after Deutsche Bank upgraded the stock from 'hold' to 'buy', citing its strong cash-flow potential.

Despite the continued weakness in oil, oil stocks were bouncing back after heavy falls the previous session with BP, Repsol, Shell and TotalEnergies all putting in decent gains.

Banking stocks across the continent were also performing well, with BNP Paribas, Commerzbank, Standard Chartered and HSBC edging higher.

Even Virgin Money UK was higher despite reporting a 42% fall in statutory profit in its full-year results to £345m. Underlying net interest income rose by 8% to £1.72bn but impairment losses on credit exposures surged.