Europe midday: Stocks in the green but industrial production data disappoints

European stocks were still in the green by midday on Wednesday amid hopes the US and China will agree an extension to their trade truce, but indices were off their highs after the release of weaker-than-expected industrial production figures.

The benchmark Stoxx Europe 600 index was up 0.4% to 364.33, France's CAC 40 was 0.3% higher at 5,070.43 and Germany's DAX was 0.2% firmer at 11,153.45.

The positive mood came after US President Trump said late on Tuesday that he could extend the 1 March deadline to reach a trade deal with China if the two sides are making good progress.

IG market analyst Chris Beauchamp said: "Trade tensions will never go away so long as Donald Trump is in charge in the White House, given his 18-century mercantilist views on trade, but perhaps an extended stalemate is coming into play. By delaying beyond the 1 March deadline, Mr Trump ensures that the issues don’t go away, but the tit-for-tat tariffs of 2018 might not be so prevalent.

"After all, as the next election tiptoes ever closer, the idea of an all-out trade war, while sounding good for polling purposes, might not result in extra votes. Market continue to view the possible extension of the deadline as a positive, while an end to the US budget standoff would also remove another area of concern."

On the corporate front, Dutch brewer Heineken fizzed higher as its full-year earnings beat expectations, with revenue and margin ahead of consensus, while Dulux owner Akzo Nobel also gained on the back of solid fourth-quarter numbers.

Shares in Europe's largest asset manager, Amundi, rose after it confirmed its profit targets for 2020 and lifted its earnings per share for 2018.

Elsewhere, French corporate and investment bank Natixis pushed up even as it said fourth-quarter profit fell as it booked a €260m loss on Asian derivatives.

Speciality chemicals company Clariant was in the red as it posted a drop in fourth-quarter sales and operating profit and Dutch bank ABN Amro was weaker as its fourth-quarter net profit undershot analysts' expectations.

In macroeconomic news, the latest figures from Eurostat showed that industrial production in the eurozone was worse than expected in December.

Production fell 0.9% on the month, coming in much weaker than the 0.4% decline analysts were expecting. On the year, meanwhile, industrial production dropped 4.2%, which was also worse than the 3.2% fall pencilled in.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the data was "very weak" but the details are mixed and the crash in Ireland was the primary driver.

"Production rose in France and Germany, but the aggregate euzone number was pulled lower by a 13.2% crash in Ireland - thanks mainly to declining output in the pharma and electronic equipment sectors - and weakness in Italy and Spain. Production also declined sharply in the Netherlands, by 3.2%, but edged higher in Portugal and Austria. Across sectors, weakness in production of capital goods remained a drag as did energy output, but production durable consumer goods rebounded further, indicating that the auto sector is revving up again, slightly. Production of intermediate goods was flat, while non-durable goods output fell by 1.5%."

Andrew Kenningham, chief Europe economist at Capital Economics, said "the downturn will serve to keep worries about a possible euro-zone recession alive".

"For now we suspect that the industrial sector will perform a little better at the start of this year, in line with the manufacturing PMI. And other parts of the economy should do better than industry. However, the risk of an outright recession has clearly risen," he said.