German Data Keep European Stocks Recovery in Check -- Update

By Tommy Stubbington and Josie Cox 

European stocks steadied Wednesday following a two-day selloff, but yet more disappointing economic news out of Germany thwarted any kind of relief rally and underscored just how delicate the region's recovery still is.

The Stoxx Europe 600 was flat in early trade having tumbled 1.4% on Tuesday, after a survey showed a slowdown in eurozone manufacturing and services activity.

On Wednesday, data showed that German business confidence fell to its lowest level in more than a year in September, suggesting that Europe's largest economy is unlikely to return to strong growth as it scrambles to rebound from an economic contraction in the second quarter.

"Various factors were likely at play here," Evelyn Herrmann, an economist at BNP Paribas said, pointing to geopolitical tensions with Russia, the latest round of sanctions, and the risk of a further escalation of tensions and retaliatory action.

"Overall, the soft readings of the September business surveys, especially in the forward-looking components, signal downside risk to our fourth-quarter gross domestic product growth forecast," economists at Barclays said.

The DAX extended its earlier fall to trade 0.2% lower on the day, in line with London's FTSE 100. Paris' CAC 40 clung to a 0.2% gain.

In the U.S., the S&P 500 was indicated rising 0.14% at the open, recovering from a day-earlier fall, after the U.S. began airstrikes in Syria, unnerving investors. Futures, however, don't always mirror moves in the index after the opening bell.

In currency markets, the euro gave up some marginal gains from earlier in the session to trade at $1.2844 against the dollar, broadly unchanged on the day. The dollar was trading around 0.2% lower against Japan's yen, at 108.59.

In commodities markets, gold was 0.1% higher at $1,222.90 an ounce, while Brent crude oil shed 0.3% to $96.56 a barrel.

In corporate news, shares in Dutch parcel delivery firm TNT Express NV slid sharply after it announced a profit warning. U.K. property website Rightmove PLC also fell after it was downgraded to sell from buy by Citigroup.

Shares in Merck KGaA were the top gainer in the pan-European index, a day after the German pharmaceutical company said it is paying $17 billion to acquire Sigma-Aldrich Corp., a U.S. supplier of laboratory testing materials, to reduce its reliance on finding blockbuster drugs.

Dutch electronics group Philips NV rose sharply too after announcing plans to spin off its lighting business on Tuesday. "We view the announcement as a positive shift in the portfolio, which should unlock value for shareholders," Citigroup analysts wrote in a note.

Write to Tommy Stubbington at [e-mail] and Josie Cox at [e-mail]