(Sharecast News) - After a positive start, European stocks dropped into the red by the Monday lunchtime, with the Stoxx 600 pulling back from a four-week high as more underwhelming Chinese stimulus measures failed to lift sentiment.
The Stoxx 600, which rose as high as 0.2% early on, was down 0.5% at 522.62 by 1255 CEST,, with most indices across the continent registering losses. The pan-European benchmark index closed Friday's session at 524.99, its highest since 27 September when it closed at a record high of 528.08.
The People's Bank of China said on Monday that it was cutting its two benchmark lending rates by 25 basis points.The one-year and five-year loan prime rates were reduced from 3.35% and 3.85% to 3.10% and 3.6%, respectively, in line with market expectations.
"The issue here is that while there's been an immediate easing in monetary policy, following the announcement of measures designed to shore up China's troubled economy, the Chinese authorities have failed to provide details of the promised fiscal stimulus. Markets are likely to remain under pressure until investors see some follow-through here," said David Morrison, senior financial analyst at Trade Nation.
The economic data calendar was relatively quiet on Monday, with the only major release of the day being Germany's producer price index for September. Wholesale prices were 0.5% lower during the month, their first fall in seven months, while the annual rate of deflation picked up to 1.4% from 0.8% previously.
Market movers
Shares in JDE Peet's surged 17% in Amsterdam after German investment company JAB bought out part-owner Mondelez for €2.2bn on the same day the Dutch coffee and tea maker appointed a new chief executive. JAB agreed to buy Mondelez's remaining 86m shares for €25.10 a share, a 32% premium to the stock's closing price of €18.96 on Friday.
Mining stocks were in demand in London, including Fresnillo, Glencore, Antofagasta and Anglo American, following the rate cut in China. Record-high gold prices were also providing a boost to stocks.
The news also boosted shares in European fashion brands such as Burberry, Hermes and LVMH on hopes that cheaper loans could be a catalyst for luxury spending in China.
Intertek was a heavy faller in London after RBC Capital Markets downgraded the lab testing company to 'sector perform' from 'outperform', saying the stock "now trades at what we deem to be fair value".