Europe midday: Markets drop as Brexit disruption takes centre stage

European markets were lower at lunchtime on Tuesday as MPs in Westminster returned from their summer recess to debate legislation that could block a no-deal Brexit.

The euro area economy has already been hard hit by the result of the 2016 Brexit referendum and the two years of uncertainty that followed, though expectations linger that the fallout could only worsen in case of the so-called 'Hard Brexit' that opposition MPs are working so hard to avoid.

Against that backdrop, the benchmark Stoxx 600 was trading 0.31% lower at 379.51, with London's FTSE 100 down 0.29% at 7,261.06.

Other indices on the Continent followed suit, with a drop of 0.36% to 11,910.70 for the German Dax and a dip of 0.26% to 21,396.23 on the FTSE Mibtel.

Sterling meanwhile dipped below the psychological 1.20 level against the Greenback, moving rapidly towards post-referendum lows.

Connor Campell, analyst at Spreadex, said: "Sterling likely feels it is in a no-win situation, a sentiment expressed in another rough open for the currency this Tuesday. If the week’s Commons Brexit delay vote fails, then the country remains on track to crash out of the EU without a deal. If it succeeds, then it appears it will trigger a general election on October 14th, the prospective uncertainty of which is enough to turn the pound’s stomach."

For his part, Prime Minister Boris Johnson has argued that rebel MPs who vote for legislation to block no-deal would undermine Britain's negotiating position and used a speech on Monday night to stress that he did not want a general election.

Away from the Brexit saga, investors were also closely monitoring the headlines for any news around the current state of US-China trade talks after reports suggested that Washington and Beijing were struggling to agree on a date for more face-to-face meetings between their negotiators.

Meanwhile, Ireland’s central statistics office reported that the nation's unemployment rate edged down to 5.2% in August from 5.3% in July, while Eurostat said prices at factory gates in the 19 Eurozone countries climbed in line with expectations in July after they rose by 0.2%.

Among individual stocks, those with UK exposure moved lower, with banks RBS and Lloyds and housebuilders Barratt Developments and Persimmon all trading down.

Ferguson bucked the trend to jump by 2.44% after the British plumbing products distributor said it will separate its UK operations to focus on its North American business.