Europe midday: Stocks rise on improved US-trade headlines

Positive headlines around the US-China trade talks helped to lift investor sentiment at the start of the week, offsetting a warning from the German central bank, the Bundesbank, that the Eurozone's largest economy might be set to slip into a recession, but analysts remained cautious.

On Sunday, US national economic advisor, Larry Kudlow, told Fox News Sunday that talks were planned between negotiators from both sides via teleconference over the next week to 10 days and that recent phone calls between the negotiators had been positive.

Also at the weekend however, Donald Trump appeared to call into doubt reports that the US Commerce Department was set to renew a 90 day waiver on the prohibition against US companies trading with Chinese telecommunications group Huawei.

"We'll see what happens. I'm making a decision tomorrow," Trump reportedly said.

Against that backdrop, as of 1229 BST the benchmark Stoxx 600 was adding 1.11% to 373.74, alongside a gain of 1.53% to 11,739.31 for the German Dax while the FTSE Mibtel was adding 1.59% to 20,645.80.

Nonetheless, according to Michael Hewson, chief market analyst at CMC Markets UK, investors were still facing a cocktail of potential risks, running from the protests in Hong Kong to Brexit or US-Iran tensions, to name but just a few.

"That this is coming at a time when risks to the global economy are rising isn't a coincidence, however there is a risk that markets are overestimating the ability of central banks to combat the next economic downturn," Hewson said.

Mislav Matejka at JP Morgan echoed that sentiment, to an extent, telling clients that he was still anticipating a "tactical correction" to unfold in stock markets August.

However, on longer time frames, Matejka held a more constructive view, pointing out how typically market peaks and an economic recession were only seen about 11 and 17 months following an inversion in the US Treasury yield curve, respectively.

On the economic front in Europe meanwhile, in its latest monthly economic report, the Bundesbank said that the German economy might be set to slip into a recession.

Economic growth in the third quarter would continue to be lacklustre and might "continue to fall slightly", the Bundesbank said.

In parallel, Eurostat reported that the headline rate of consumer price inflation in the euro area slipped from a year-on-year 1.3% clip for June to 1.0% in July (consensus: 1.1%).

And the Eurozone's current account surplus narrowed from €30.0bn for May to €18.0bn in June or the equivalent of 2.7% of gross domestic product.