Europe midday: Stocks come off lows after results from top US lenders

European shares are holding lower but have come off their session lows following a spate of better-than-expected earnings reports from two of the largest US lenders.

"The recent run higher in stocks has taken a bit of a hit this morning, although it is more of a pause for breath rather than a change in trend. With US banks putting earnings season into high gear today some caution was to be expected, particularly after the gains in equities over the past two weeks," said IG chief market analyst Chris Beauchamp.

"The news that Johnson & Johnson has paused its vaccine trial has not gone entirely unnoticed, but the market has learned to live with the ups and downs of product development over the past few months, with the reaction to this kind of news much more muted than during the summer."

The pan-European Stoxx 600 index was down 0.25% to 372.09 with all other major European bourses lower by a similar amount. Dow Jones futures were 109 points lower.

Johnson & Johnson announced overnight that it was pausing its Covid-19 vaccine trial after a participant reported an “unexplained illness”.

The mood was also dampened by fading hopes of a US stimulus deal, with little appetite from politicians to get a deal done.

“Investors are also not too hopeful for another stimulus aid package from the US this week as it is pretty clear that House members are in no mood to have any sort of resolution,” said Avatrade chief analyst Naeem Aslam.

“In addition to this, Senate Republicans have also failed to warm up to the President’s stimulus proposal. Traders know that this is a bumpy road, but there were hopes that perhaps we may finally see politicians coming to their senses and finally forming a deal. “

Quarterly earnings from US banking giants JP Morgan and Citigroup both printed ahead of analysts' estimates.

Investors were also eyeing Brexit developments with Thursday’s self-imposed UK deadline for a trade deal with the European Union.

On the economic front, official UK data showed the unemployment rate rose to a higher-than-expected 4.5% in the three months to August 31.

In company news, Airbus fell 2.9% as JPMorgan cuts its rating on the planemaker's stock to "underweight" from "neutral".

Shares in German pharma firm MorphoSYS topped the losers board, down 7% as the company announced a €325m bond offering.

Stocks exposed to the coronavirus pandemic and related restrictions felt the impact, with engine maker Rolls-Royce one of the worst performers following strong gains over the past week, closely followed by British Airways and Iberia parent IAG, Premier Inn owner Whitbread, GKN owner Melrose and InterContinental Hotels.

Cineworld, Upper Crust owner SSP, pub chain Mitchells & Butlers, cruise operator Carnival and travel company TUI also fell sharply.