Europe midday: China data a drag as shares make small gains

European shares were treading water at midday on Monday as sentiment was tempered after China unexpectedly cut a key interest rate in response to weak consumer and industrial data.

The pan-European STOXX 600 index was up 0.2%, with regional markets mixed. China's central bank on Monday unexpectedly cut a major interest rate in an attempt to bolster an economy that is struggling to grow amid repeated Covid lockdowns and a property downturn.

The People’s Bank of China trimmed its medium-term lending rate by 10 basis points to 2.75%. Analysts had forecast no change.

“China’s economy is suffering from ongoing Covid lockdowns and a fragile property market. Developers reported lower rates of investment into new building projects whilst sales of new homes dived by 31% in the year to end-July,” said Hargreaves Lansdown fund manager Steve Clayton.

Official data released on Monday showed consumer and factory activity was weaker than forecast as the pace of the country’s economic recovery continued to be sluggish.

Retail sales rose 2.7% year on year in July against forecasts of 5% while industrial production was 3.8% higher, against expectations of 4.6%.

"One area where traders are paying attention to the Chinese data is clearly commodity markets, with crude oil off 2%," said OANDA analyst Craig Erlam.

"The figures from China really are a concern and the authorities have a big job on their hands arresting flagging domestic demand. That doesn't bode well for oil demand especially when the country remains so committed to zero-Covid. And with cases continuing to rise, the downward pressure on oil prices could intensify."

In equity news, AstraZeneca gained after the drugmaker said its Enhurtu cancer drug, developed with Japan's Daiichi Sankyo, delayed the progression of a form of advanced breast cancer in previously treated patients.

HelloFresh surged 9% after the German meal-kit maker reported better-than-expected quarterly results.

Scandinavian airline SAS shares took off after the company secured bridge financing through bankruptcy protection proceedings.

Reporting by Frank Prenesti at Sharecast.com