Europe midday: Stocks push higher, but HSBC sell-off limits gains

(Sharecast News) - European markets largely recovered from their earlier losses by Tuesday lunchtime, though a sharp drop in HSBC's share price was limiting upside as banking stocks across the continent struggled to make gains.

HSBC shares in London were down over 7% by 1248 BST, on track for their lowest close since early April, after third-quarter results from the banking heavyweight underwhelmed.

Along with a disappointing update from Reckitt Benckiser, that pushed the FTSE 100 0.9% lower.

As a result, the pan-European Stoxx 600 index was up just 0.1% just after the midday mark, supported by gains across Frankfurt, Paris, Milan, Madrid and Zurich.

Despite the push into positive territory, market sentiment was generally cautious ahead of interest rate decisions from the US Federal Reserve and European Central Bank on Wednesday and Thursday, respectively.

Investors were also assessing the impact of elevated energy prices - Brent crude futures were down 0.6% at $110.14 a barrel but still close to their highest since May - along with geopolitical tensions in the Middle East and a busy corporate earnings calendar.

Economic data provided some encouragement, with Germany's Ifo business climate index rising to 90.2 in October from 89.9 in September, suggesting a gradual improvement in Europe's largest economy.

Back to equity movements, HSBC reported that pre-tax profit rose to $9.63bn in the third quarter, with revenue 5% higher at $18.62bn, mainly reflecting growth in banking net interest income. Both figures, however, were just slightly below forecasts.

"The results extend recent share price losses for the bank, which has been hit recently by Beijing's increased scrutiny on Chinese wealth going overseas. That is a problem for HSBC given a key part of its current strategy is doubling down on its Asian focus," said Russ Mould, investment director at AJ Bell.

"HSBC is under pressure to bring costs down and while there is clear evidence of progress in the quarterly results, the market is likely to keep management's feet to the fire on this score."

European banking peers were putting in a mixed performance, but most were struggling to push convincingly into positive territory, including Credit Agricole, BNP Paribas, Commerzbank, Santander and Deutsche Bank all subdued.

Also weaker in London was Reckitt Benckiser as the consumer goods giant cut its full-year sales growth guidance after third-quarter trading fell short of expectations, hit by manufacturing constraints in North America and weaker demand for vitamins and supplements in China.

Losses, however, were tempered by gains among technology and semiconductor stocks, led by Dutch chip equipment maker BE Semiconductor Industries after Applied Materials said it would up its stake in the company to approximately 20%.

Meanwhile, Swiss packaging group SIG surged after reporting stronger third-quarter trading and raising its full-year margin guidance.