- German and Eurozone investor confidence falls
- UK inflation eases slightly in January
- Italy's Renzi in coalition talks
FTSE 100: 0.08%
CAC 40: -0.39%
FTSE MIB: 0.21%
IBEX 35: -0.88%
Stoxx 600: -0.39%
European stocks were mostly lower as German investor confidence fell for a second month in February, raising concerns on the health of Europe's biggest economy.
The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, dropped to 55.7 from 61.7 in January, after reaching a seven-year high of 62 in December. Economists had predicted a reading of 61.5.
The slump came despite German economic growth of 0.4% in the fourth quarter which exceeded analysts' expectations.
"February's German ZEW survey gave mixed signals, suggesting that whilst the economic situation is improving slowly, investors are losing some optimism about the future," Capital Economics pointed out.
Based on solid gross domestic product (GDP) growth in the last quarter, the economist expects the German economy to expand by around 1.5% over 2014 as a whole.
ZEW also released the Eurozone economic sentiment index for February which dipped to 68.5 from 73.3. Analysts had expected it to rise to 73.9.
The report may add pressure on the European Central Bank (ECB) to consider changing its monetary policy to spur the bloc's recovery when it meets next month.
ECB President Mario Draghi earlier this month signalled that the monetary authority will look at implementing greater measures after the release of more comprehensive data in March.
Elsewhere in Europe, new car sales increased for a fifth consecutive month in January by 5.2% from a year earlier to 967,800 vehicles, the Brussels-based European Automobile Manufacturers Association, said today. It compared to a 13% jump in December sales.
In the US, trading will resume following a break yesterday to celebrate Presidents' Day. It will be a relatively quiet day of economic releases with the main event being the Federal Reserve's board meeting on banking supervision tonight.
UK inflation slows
The consumer price index (CPI) gained 1.9% year-on-year in January, down from the previous month's 2%, according to the latest data available from the Office for National Statistics (ONS).
It surprised analysts who had expected inflation to remain at 2%. It was, however, in line with the Bank of England's (BoE) target of around 2%.
The drop, on the other hand, will make it less likely the BoE raises interest rates later this year, according to Alpari UK analyst Craig Erlam.
"While this is negative for sterling, it is very good for the UK economy as it means there's less chance of the recovery being choked off by a premature rate hike and it continues to close the gap between wage growth and the cost of living," he said.
Italy's Renzi lays out bold reforms
Italian centre-left leader Matteo Renzi is in coalition talks today after receiving a mandate to form a new government following the resignation of Prime Minister Enrico Letta.
Renzi plans a radical programme to lift Italy out of its most serious economic slump since World War Two. He will need to seal a formal coalition deal with the small centre-right NCD party to secure a majority and name his cabinet.
President Giorgio Napolitano asked Renzi to form the next government after Letta caved into calls to step down following a meeting of their Democratic Party last week.
"We think the change in government will push spreads tighter and keep some momentum on reforms for now; we remain positive on Italy," Royal Bank of Scotland (RBS) said this morning in a note.
RBS believes Renzi's bold strategy is risky but failure to implement the reforms he has laid out could hurt his credibility in the long run.
Inditex, BHP Billiton
Inditex declined after Citigroup downgraded the retailer to 'neutral' from 'buy'.
BHP Billiton gained after the world's biggest mining company posted first-half profit that beat analysts' forecasts.
Centrica fell as UBS lowered its recommendation on the UK energy supplier to 'sell' from 'neutral'.
Casino Guichard-Perrachon advanced after reporting an 18% jump in 2013 earnings.
Pandora climbed as the Danish jeweller reported fourth-quarter income that surpassed market expectations.
Alstom was down following reports the French government has appointed consultants to study the train and power-equipment maker's market position and its strategic options.
The euro rose 0.16% to $1.3729.
Brent crude futures bumped up $0.119 to $109.310 per barrel, according to ICE data.