Europe midday: Markets drop after trade deal surge, Unilever stumbles

European shares were lower at lunchtime on Tuesday, dropping back after nearing multi-year highs in the previous session on the back of investor optimism after China and the US agreed a ‘phase one’ trade deal.

At 1159 GMT, the Stoxx 600 was 0.7% lower at 414.66, as Germany's DAX fell by 0.8% to 13,298.25 and the French CAC 40 dipped by 0.4% to 5,967.96. Meanwhile, London's FTSE 100 was down by 0.2% at 7,505.34.

Sino-US relations remained in focus, as details concerning Chinese agricultural purchases remained unclear and after the South China Morning Post said that Beijing faced a "huge challenge" to hold down its end of the trade agreement.

Analysts at Rabobank said news of an agreement and the avoidance of new tariffs on Chinese goods had overshadowed the very real potential for the "inevitable difficulties ahead", which include a second phase deal and implementing measures to monitor and enforce new accords.

"The prevailing détente is however the key market focus, with investors heralding the (temporary) easing of some 20 months of trade related tensions," added analysts.

To take note of, the pound was moderately lower versus the euro, retreating 1.21% to 1.1820 after Britain's Prime Minister, Boris Johnson, said that Parliament would pass legislation to close off the possibility of an extension to the 31 December 2020 deadline for agreeing a trade deal with Brussels.

Among individual stocks, British-Dutch consumer goods company Unilever was under the cosh after it cautioned that full-year underlying sales growth would be "slightly below" guidance of the lower half of its 3-5% multi-year range amid challenges in some of its markets.

IG analyst Chris Beauchamp said: "The final few months of each of the past four years have been dire for Unilever, but then set the shares up nicely for some gains early in the following year. If history repeats itself, Unilever at 18.8 times earnings could be an interesting play."

Shares of UK engineer Senior were trading sharply lower after one of its key clients, US jetmaker Boeing, announced a halt to production of its 737 Max aircraft starting from January, until America's civil aviation watchdog, the FAA, rules the airplane safe to fly again.

Fiat Chrysler stock was firmer after Reuters said sources had informed it that the carmaker's board are meeting on Tuesday to discuss a $50.0bn merger with Peugeot.

German defence contractor Rheinmetall was on the rise after it was initiated with a 'buy' rating by analysts at Goldman Sachs.

Classifieds specialist Scout24 climbed amid reports that it is closing in on a deal to sell its AutoScout24 business for €2.5bn (£2.15bn).

Voestalpine was in the red after the Austrian steelmaker revealed plans on Monday to cut its dividend payout as it warned on full-year profits due to write-offs and provisions.