Europe open: Markets mixed as investors eye ECB meeting
European stocks were mixed in early trading on Monday as investors looked ahead to this week's European Central Bank meeting amid expectations of more stimulus.
As of 0931 BST, the Stoxx 600 index was 0.1% lower at 386.80 as Germany's Dax and London's FTSE were flat at 12,194.91 and 7,282.13 respectively. France's CAC 40 dropped by 0.2% to 5,593.36.
Asian markets were boosted by China's decision to cut banks' reserve requirement ratio on Friday, but trading in Europe was more subdued as investors eyed a more comprehensive stimulus package from the ECB.
Neil Wilson, market analysts at Markets.com, said: "The ECB is likely to announce 20bps of cuts to the deposit rate and commit, or at least leave open the possibility, to do more. Cutting the deposit rate further would of course make its TLTRO III programme more appealing.
"A 10bps would be a little short of expectations. Expect 20bps of cuts pencilled in for this year and a change to forward guidance that indicates further cuts. If it goes full kitchen sink, 20bps in cuts now and another 20bps before the year is out is not out of the question. We should also expect an announcement on tiered deposit rates to soften the impact on banks. It’s worth nothing that concerns about bank profitability (or even worse) may force the ECB to rein in its natural instincts to cut heavily. The main refinancing rate and marginal lending rate are likely to be unchanged.
"QE seems more open to debate, although I would err on the side of the ECB announcing it will restart bond buying in October. There are conflicting reports about whether the ECB announces a new QE scheme or simply gives a very strong indication that it will do so in December. Given what’s priced into the market, if there is no QE we could well see the euro appreciate."
Meanwhile, the UK looked set for another week of Brexit turmoil as Prime Minister Boris Johnson's position became even more tenuous over the weekend after former Home Secretary Amber Rudd quit the Conservative Party. Johnson is widely expected to call for, and lose, a second vote for a general election on Monday.
Reports also suggested he could ignore the law to avert a no-deal Brexit by refusing to ask Brussels for a delay.
Craig Erlam, market analyst at Oanda, said: "We don't need to be reminded that we're living in quite extraordinary political times at the moment, it seems we get daily reminders of that. But with the PM now reportedly weighing up the legality of the bill and threatening to refuse, risking jail time, it is shaping up to be another extraordinary few days before Parliament is suspended ahead of next month's Queen's speech."
On the macroeconomic front, investors were mulling over the latest figures from Destatis, which showed that the German trade surplus widened in July as exports unexpectedly rose.
Seasonally-adjusted exports rose 0.7% on the month in July, compared to a 0.1% drop in June and expectations for a 0.5% decline. Meanwhile, imports fell 1.5% versus expectations for a 0.5% jump.
The seasonally-adjusted trade surplus rose to €20.2bn in July from a downwardly-revised €18bn in June. Not adjusted for seasonal and calendar effects, the trade balance widened to €21.4bn from €16.6bn.
In corporate news, German telecoms firm 1+1 Drillisch continued to rack up gains on news that the nation's government signed a pact to build 1,400 mobile phone masts nationwide in order to close up white spots.
Airlines were under pressure, with Air France, IAG, EasyJet and Lufthansa all falling after the former said close-in bookings in the year's peak travel period were weaker than foreseen due to a softening of the macro-economic environment.