Europe midday: Stocks rise as well-received earnings offset worries about China

European stocks reversed early losses to edge higher as well-received earnings and economic data helped to offset a downbeat session in Asia and worries about the Chinese economy, although the Greek stock market fell heavily.

At midday, the benchmark Stoxx Europe 600 index was up 0.7%, France’s CAC 40 was 0.4% higher and Germany’s DAX was up 0.6%.

It was a very different picture in Greece, however, where the ASE Composite tumbled 17%, with banks suffering the brunt of the losses, as it reopened after five weeks of being closed. Trading on the Athens stock exchange was suspended in June as part of capital controls imposed on Greece as it struggled to reach a bailout agreement with creditors.

“China remains a bit of a drag but all in all European stocks in regard to valuation and potential are very much preferred to US stocks and with today being the first trading day of a new month, new money seems to be flowing into Europe,” said Markus Huber, senior analyst at Peregrine & Black.

Asia experienced another negative session after the final reading for Caixin’s China purchasing managers’ index printed at 47.8 in July, which was below the preliminary reading and marked a two-year low. Analysts were expecting the index to rise to 48.3.
Still, investors in Europe took heart from some upbeat corporate results.

In London, shares in HSBC rose after the bank’s first-half profit beat expectations on the back of a strong performance in Asia. It also announced the sale of its Brazilian business to Banco Bradesco for $5.2bn.

Elsewhere, Intertek surged after posting a 16% rise in first-half pre-tax profit thanks to improved revenue momentum, margin progression and strong cash generation, and saying it was on track to meet its full-year targets.

Commerzbank was on the front foot after it said net profit in the second quarter more than doubled amid rising revenue, while Heineken rallied after the brewer’s first-half sales beat expectations.

Dutch parcel delivery company PostNL NV made strong gains after its second-quarter profit came in stronger than expected, while London-listed Rolls-Royce rallied on reports that activist fund ValueAct is urging it to accelerate cost cuts in its core aerospace business.

Data released earlier, showing the Eurozone manufacturing sector expanded steadily in July despite a drastic slowdown in Greece, also helped to underpin sentiment.

The final Markit manufacturing Purchasing Managers’ Index came in at 52.4, marginally above the flash estimate of 52.2, but below June’s 14-month high of 52.5. "The Eurozone manufacturing economy showed encouraging resilience in the face of the Greek debt crisis in July," said Chris Williamson, chief economist at Markit.

Further ahead on the macroeconomic front, investors will turn their attention to the US, where personal income and spending is due at 1330 BST, while construction spending and ISM manufacturing are at 1500 BST.