Europe open: Stocks tread water, politics in focus on both sides of the Atlantic

Markets are treading water early on Wednesday morning, as investors wait for headlines out of the ongoing trade talks between Canada and the US, albeit while keeping a wary eye on the headlines out of Italy, in particular.

A report in daily La Stampa that the Mediterranean country might be hanging its hopes on help from the European Central Bank in the form of government bond purchases was weighing on the euro.

Nevertheless, ahead of a key review of the country's sovereign credit rating, scheduled for the following Friday, the yield on the 10-year benchmark Italian government note was down by four basis points to 3.15%.

Reflective of the mood in markets perhaps, Chris Beauchamp at IG said: "Those cheering for a US/UK trade deal may wish to be careful, if the treatment meted out to Canada is anything to go by.

"Fine words butter no parsnips, but this cliché appears to be the centrepiece of the UK's approach to a deal. Trump is determined to push on with trade wars regardless of the hit to the US economy, with his eyes squarely on the mid-terms. The resilience of US equities to trade war fears is at least a crumb of comfort."

Against that backdrop, as of 0945 BST, the benchmark Stoxx 600 was drifting just 0.02% or 0.09 points lower to 385.37, alongside a 0.02% or 1.81 point dip for the German Dax to 12,525.02 and a 0.41% or 84.97 point fall for the FTSE Mibtel to 20,534.51.

In parallel, euro/dollar was off by 0.24% at 1.1675.

The single currency was also losing ground versus Sterling, despite reports of difficult negotiations between Brussels and Westminster.

Turkey's lira was continuing to trade on the back foot against the Greenback, with the latter climbing by another 1.78% to 6.3872 even after the Turkish central bank said tightened liquidity by ending unrestricted overnight funding for lenders.

Earlier, an index of economic confidence in Turkey for August had plumbed its lowest level since 2009 with a separate report revealing that the trade deficit widened in July versus the prior month.

Readings on German consumer confidence for September and consumption by French households in July were more or less as expected by economists, but economists were cautious.

Consultancy Gfk's German confidence gauge slipped by 0.1 points for September, printing at 10.5 (consensus: 10.6).

Meanwhile, INSEE reported that consumption in France was up by just 0.1% month-on-month in July (consensus: 0.3%), although the miss was offset by upwards revisions to the prior month's reading.

Even so, Claus Vistesen at Pantheon Macroeconomics told clients: "Private consumption in France slowed significantly in the first half of the year, and these data don’t fill us with optimism of a rebound in Q3, though the August and September numbers could well change that picture."

Inditex was among the worst performers on Wednesday, on the heels of a one notch downgrade out of Morgan Stanley on the retailers' shares to 'underweight'.

"Inditex is still a world class retailer, but its investment proposition has been weakening for some years. And we don't think that is properly reflected (yet) either in consensus estimates or the multiple the market is applying to them," the broker's analysts said.