Europe midday: Stocks push lower amid Greek uncertainty; US GDP in focus

European stocks fell further into red on Friday, as investors continue to grapple with uncertainty over Greece, ahead of the release of key US growth figures.

By 1140 BST, the benchmark Stoxx Europe 600 index was down 0.7%, France’s CAC 40 was 1% weaker and Germany’s DAX was off 0.9%.

News on Greece kept coming on Friday, as minister Yanis Varoufakis said the country was looking for a comprehensive agreement with its international creditors that should include debt relief.

During an interview with Greek radio station Vima FM, he said the country was very close to completing a Greek programme review, and that the talks with its creditors had shown progress.

Meanwhile, European Union Economy Commissioner Pierre Moscovici said in an interview with CNCB that talks between Greece and its lenders had seen “good progress”, although he added that further measures, such as pensions, needed to be discussed.

“European equity markets are rattled as discussions over Greece’s finances rumble on,” said David Madden, market analyst at IG. “It’s the last trading day before the end of May deadline for Greece, and traders are not takings any chances. Until we have some clarity about a deal being struck, dealers will always fear for the worst.”

“Christine Lagarde of the IMF stated a Greek exit of the eurozone is possible, and even though only the Greek people can determine their membership of the single currency, the feeling that they are no longer welcome in the club is enough to send stocks sliding,” said Madden. “Traders know deep down that a deal will be reached in the nick of time, but those who don’t have the stomach for it are getting out of the market while they can.”

A spokesman for Greece said on Thursday that the government intends to reach a deal on cash-for-reforms by Sunday, while International Monetary Fund director Christine Lagarde said that Greece could leave the euro if a deal isn’t reached.

Data released earlier confirming that Greece slid back into recession in the first quarter did little to lift the mood.

Figures from Elstat showed that gross domestic product shrank 2% compared with the last quarter, confirming a preliminary estimate released earlier this month.

With the focus still firmly on Greece, better-than-expected data out of Germany failed to provide a boost to markets.
Figures from the Federal Statistics Office showed that retail sales rose by 1.7% on the month in April, beating analysts’ expectations for a 0.8% increase. On a year-on-year basis, sales were up 1%.

On the corporate front, shares in Syngenta rose following reports that it was building up defenses for a possible higher bid from Monsanto.

Vivendi was also on front foot, nudging up after the company said it would book a €4.2bn pre-tax gain from the sale of Brazilian company GVT.

Looking ahead, investors will eye the second release of US gross domestic product data for the first quarter at 1330 BST, as they look for any further clues on the timing of a rate hike by the Federal Reserve. GDP is expected to be revised much lower to show a 0.8% contraction, compared with 0.2% growth in the first estimate.

Chicago PMI is due at 1445 BST, while University of Michigan consumer confidence is scheduled for release at 1500 BST.