Europe midday: Stocks slip; all eyes on Draghi and Yellen

European stocks slipped on Friday, as investors digested comments from European Central Bank president Mario Draghi and looked ahead to a speech by Federal Reserve Chairwoman Janet Yellen later in the day.

By 1200 BST, the Stoxx Europe 600 index and Germany’s DAX were down 0.4%, while France’s CAC 40 was 0.3% weaker.

Speaking at an ECB conference in Portugal, Draghi urged European governments to step up efforts to overhaul their economies, saying that structural reforms and aggressive monetary easing are the key to lasting stability in the Eurozone.

He also said that the economic outlook for the Eurozone is “brighter today than it has been for seven long years.”

Bank of England governor Mark Carney is also due to address the forum later on Friday, while investors will eye comments from Janet Yellen, who is scheduled to speak on the economic outlook before the Greater Providence Chamber of Commerce after the European close.

“Speeches from ECB president Mario Draghi, Bank of England governor Mark Carney, and Fed chair Janet Yellen all more than able to give the markets a serious nudge higher or lower,” said Alastair McCaig, market analyst at IG.

Although market participants will be looking to Yellen for any further clues on the timing of an interest-rate hike, Nomura is sceptical that she will provide any.

“We suspect she will largely reiterate the themes from her last speech and from recent statements by the Federal Open Market Committe, and, as such, we do not expect her to signal any change of course,” said Nomura.

Meanwhile, Greece remained firmly on investors’ minds, after government spokesman Gabriel Sakellaridis told Skai TV that the country expects to reach a reforms deal with lenders in the next ten days.

German Chancellor Angela Merkel sounded a much more cautious note, however, saying there was “still a lot to do” following her late-night talks with French President Francois Holland and Greek Prime Minister Alexis Tsipras on Thursday on the sidelines of the EU summit in Riga.

With so much going on, data releases took a bit of a back seat.

A slightly better than expected German Ifo survey for May failed to have any impact on markets. The Ifo Institute index of German business confidence printed at 108.5 from 108.6 in April, which was a touch ahead of analysts’ estimates of 108.3.

Data out earlier on Friday showed that German gross domestic product expanded by 0.3% in the first quarter from 0.7% at the end of 2014, confirming a preliminary estimate published last week.

Elsewhere, the French manufacturing confidence index rose to 103 in May from 102 in April - better than expected and its highest level since August 2011.

In corporate news, Swiss luxury goods company Richemont fell after it posted a 36% drop in annual profit on the back of previously-announced losses on financial instruments.

HSBC nudged higher after the bank confirmed rumours that it is looking at a disposal of its Brazilian operators, although it has not made any decisions on the matter yet.

Shares in UK water company Severn Trent slipped after it posted a 53.5% drop in full-year pre-tax profit, pointing to a fair value loss on financial instruments, largely due to lower expectations for future interest rates, and an exceptional tax credit in the previous year.

Still to come on the economic front, the release of the US consumer price index (CPI) for April at 1330 BST is likely to be in focus. It’s expected to show that the annual rate of inflation dropped to -0.2% in April from -0.1% in March.