Europe midday: Shares flat as investors digest EZ PPI data, China rating cut

(Sharecast News) - European shares edged lower on Tuesday as investors digested eurozone business activity data and a cut in China's credit rating to 'negative' from 'stable' by Moody's. The pan-European Stoxx 600 index was down 0.02% with major regional bourses mixed.

Industrial producer prices in the eurozone increased by 0.2% in October, according to data released on Tuesday by Eurostat.

Producer price inflation slowed from 0.5% in September, in line with analysts' expectations. Energy prices were up 1% over the month, while durable consumer goods increased just 0.1% and prices were stable for capital goods, but prices of non-durable consumer goods fell by 0.1% and by 0.3% for intermediate goods.

Compared with last October, producer prices were down 9.4% after a record 12.4% drop the previous month.

Economic activity in the eurozone continued to shrink in November despite the closely watched composite purchasing managers' index (PMI) rising to a four-month high.

The S&P Global ad Hamburg Commercial Bank (HCOB) eurozone composite PMI Output Index recorded its sixth straight sub-50 reading last month, indicating a contraction in activity, data revealed on Tuesday.

The composite PMI, which combines activity in both the manufacturing and services sectors, was revised up to 47.6, its highest since July and up from October's 35-month low of 46.5.

Britain's FTSE 100 was down 0.67% after Qatar Holding cut its stake in Barclays Bank. The UK mood was also tempered by data showing consumers remained cautious despite the increasing number of Black Friday deals ahead of the Christmas period.

Like for like sales in November rose 2.6%, unchanged from the previous month, with sales of high value goods remaining soft, with consumers preferring to go with lower ticket and essential items spend of food and drink, health and personal care.

On the China front, Moody's said its cut reflected the risks related to its persistently lower medium-term economic growth and ongoing downsizing of the property sector.

It expects China's annual GDP to come in at 4% in 2024 and 2025 and average 3.8% between 2026 and 2030. Predictably, China's finance ministry said it was disappointed by the downgrade and called Moody's concerns "unnecessary".

"China has struggled with a bumpier than expected post covid recovery. It has been grappling with weak demand, an embattled property sector, declining imports and exports, and heavy debts from long-term infrastructure spending," said Interactive Investor analyst Victoria Scholar.

"The government has stopped publishing youth unemployment figures, after they hit a record high in the summer. While the authorities have been attempting to bolster demand through stimulus measures, more needs to be done to support the world's second largest economy particularly amid the backdrop of sluggish global demand."

In equity news, shares in Barclays fell after Qatar Holding moved to sell around £510m in stock.

Telecom stocks were in focus, with Ericsson up after striking a deal with AT&T to build a major telecom network using ORAN technology, while Nokia plunged 9.7% on losing more supplier work to Ericsson.

Reporting by Frank Prenesti for Sharecast.com