Europe midday: Markets flat as autos gain, defence stocks slide

(Sharecast News) - European stocks flatlined on Friday, trading within a narrow range amid a lack of catalysts to push markets back above recent record highs.

The Stoxx 600 was little changed by lunchtime, down just 0.05% at 571.01, with most major markets swinging between gains and losses for most of the morning. The index settled at an all-time closing high of 573.79 on Wednesday.

Strong performances in the auto sector - bolstered by a strong quarterly update from Jeep and Fiat maker Stellantis - were offset by weakness in the defence segment following the peace deal between Hamas and the Israeli government.

Markets have largely been rangebound this week, pausing for breath after the recent rally, with the start of third-quarter reporting season likely to keep risk appetite in check.

"The great reality check otherwise known as third quarter earnings season is upon us. The overall outlook for reporters looks robust," said Derren Nathan, head of equity research at Hargreaves Lansdown.

"But one quarter's numbers alone aren't enough to justify the current market optimism. Rational investors need to keep at least one eye firmly on the future, so comments around the immediate and longer-term outlooks will be more important than ever."

In economic data, Italian industrial output slumped by 2.4% in August, the country's National Institute of Statistics reported, following a 0.4% gain in July. This was the biggest monthly decline since December and much worse than the 0.4% decline expected by analysts.

No other major economic data was released on the continent on Friday.

Market movers

Stellantis shares were higher after the auto manufacturer reported a 13% increase in vehicle shipments in the third quarter, helped by 35% growth in North America. Renault and Mercedes-Benz also gained.

Jyske Bank was also performing well, extending gains the previous session after the Danish lender upgraded its profit forecast for 2025 due to favourable market conditions and a strong performance in asset management.

Defence names like Hensoldt, Renk, Leonardo, Babcock, QinetiQ, Rolls-Royce, Thales and Rheinmetall were all weaker as geopolitical risk premiums eased following the Israel-Hamas peace deal.

"While Israeli airstrikes continued in the hours before the vote, the announcement marked the most concrete step yet toward ending the two-year conflict. The prospect of reduced tensions has already weighed on oil and defence shares, though for traders it is worthwhile remaining cautious given the fragility of previous peace efforts," said Joshua Mahony, chief market analyst at Scope Markets.