Europe midday: Traders playing it safe ahead of central bank rate meetings

Traders are keeping their cards close to their chests ahead of interest rate decisions by three of the world's main central banks, the US Federal Reserve, the European Central Bank and Bank of England later in the week.

US tax reforms were also in focus, ahead of a speech by President Donald Trump, on Wednesday, in which he was expected to make a final case for it. On Sunday, Trump tweeted "getting closer and closer on the tax cut bill […] House and Senate working very hard and smart".

Ahead of those events, as of 1250 GMT the benchmark Stoxx 600 was flat at 389.25, alongside a rise of 0.03% or 2.72 points on the German Dax to 13,155.09 and a dip of 0.13% or 6.83 points to 5,392.09 for the Cac-40.

Commenting on the price action in markets, Mike van Dulken at Accendo Markets said: "Global equities have made a decent start to the new week, one chock full of central bank risk and continued geopolitical fun and games. The UK's FTSE outperforms on fresh GBP weakness vs USD and EUR (scepticism after Friday's Brexit deal), helping its many heavyweights. Elsewhere investors welcomed a another Wall St record close on optimism about US tax reform, while Europe sees continued rotation out of Tech and into Banks."

On a related note, at the start of the week strategists at JP Morgan reiterated their 'overweight' stance on global equities heading in 2018, telling clients economic growth was likely to remain above trend, that the impact of US tax cuts was not yet priced-in and that the bounce in oil would boost earnings too.

In the same research note, JP Morgan called for a 'rotation' out of 'growth' and towards a 'value' style.

Trade and politics were also on traders' minds, ahead of the European Union summit on Thursday which was expected to give the 'green light' to the start of trade negotiations between London and Brussels.

Acting as a backdrop, the People's Bank of China reported that money supply growth, known as M2, accelerated from a 8.8% year-on-year clip in October to 9.2% for November (consensus: 8.9%).

Also in the background, Fed funds futures had been creeping higher and as of Monday morning were discounting a 61.7% probability of two more 25 basis point interest rate hikes from the US central bank in 2018.

The Federal Open Market Committee, the Fed's main policy organ, was due to announce its decision on Wednesday, followed by the BoE and ECB the next day.

Back in Europe, the economic calendar was light at the start of the week.

According to ISTAT, in volume terms Italian retail sales dropped by 1.1% month-on-month in October, undershooting forecasts for a dip of 0.1% by a wide margin.

As an aside, in an interview published on Sunday by Il Sole 24 Ore, International Monetary Fund chief Christine Lagarde said Italy must carry out deeper reforms as regards its jobs market, financial sector and facing up to the overhang of bad loans.

In parallel, the French central bank's industrial sentiment gauge was unchanged in November at 106.

Later in the day, the Federal Reserve will publish its JOLTS job opening report for October. In the background, chief technical negotiators from the US, Canada and Mexico were due to meet later for discussions around NAFTA.

On the corporate side of things, Lufthansa posted a 32% jump in passegenger traffic in November versus a year earlier, when it suffered six days of strike.

Elsewhere, La Repubblica reported that Unicredit was mulling a tie-up with a foreign rival in order to bulk up its footprint overseas.