Europe midday: Shares rally despite downbeat EZ PMI data

The pan-European Stoxx 600 rallied from earlier losses to be 0.12% higher with all major regional mixed.

In economic news, eurozone business output fell at the fastest rate for eight months in July, according to the latest flash PMI survey data produced by S&P Global, marking a weak start to the third quarter.

“Deteriorating forward-looking indicators such as future output expectations and new order inflows also point to the likelihood of the downturn deepening in coming months, prompting companies to pull back on hiring,” S&P Global said.

“Price pressures meanwhile moderated further, with average selling prices rising at the slowest rate for almost two-and-a-half years. Prices charged by manufacturers fell at a rate not seen since the height of the global financial crisis in 2009 amid slumping demand, while service sector selling price inflation cooled to a 21-month low.”

The flash eurozone composite PMI output index came in at 48.9 for July, down from 49.9 in June – an eight month low. A reading below 50 indicates a contraction.

Meanwhile the services business activity index fell to 51.1 from 52.0), its lowest in six months, and the manufacturing output index crashed to at 42.9 from 44.2 in June, the worst in more than 3 years.

“The recent market moves are stemming from the pivot towards the US, where the Federal Reserve is in position to set the stage for another interest rate increase, after it resumes its monetary tightening campaign this week. On Wednesday, the Federal Open Market Committee is widely expected to raise its benchmark rate,” said Hargreaves Lansdown (LON:HRGV) analyst Sophie Lund-Yates

“The debate around how much the economy needs to be zapped with higher rates to quash inflation properly is still raging on. While the expectation is that interest rates will need to go higher still, that’s led to some stagnation in the US markets as we kick off the week, following strong gains last week.”

“Investors are holding their breath ahead of key tech earnings, which among other things, will paint a picture for how advertising demand is shaping up, as well as how the league tables are looking for the AI race. Market volatility, especially from the Nasdaq composite, is likely to be coming down the line.”

In equity news, shares in S4 Capital slumped by a fifth as it cut full-year guidance to reflect caution on the part of its technology clients. Net revenue over the second quarter was below budget, especially in May and June.

The digital advertising and marketing firm attributed the softness to the challenging macroeconomic conditions and cautious spending, especially by its tech clients who were very focused on the short-term.

Shares in Ryanair (LON:0RYA) fell as the low-cost airline reported a better-than-expected rise in first-quarter profit, boosted by strong Easter sales, but was cautious about demand over the coming months due to aircraft delivery delays from Boeing (NYSE:BA) and cost-conscious passengers.

The sentiment also hit rivals easyJet (LON:EZJ) and Wizz.

Vodafone (LON:VOD) gained as it said first-quarter group service revenue rose 3.7%, helped by its UK operations.

UK online supermarket Ocado (LON:OCDO) surged 10% has won a £200m settlement from Norwegian company AutoStore after a three-year legal battle over ‘robot’ patents.