(Reuters) - Demand for defensive stocks helped European shares recover from early losses on Monday as investors grappled with issues ranging from violent Hong Kong protests to an inconclusive Spanish election and weak data from China.
After falling nearly 0.5% at one point, the pan-European STOXX 600 index closed flat, helped by a turnaround in bank shares .SX7P and gains for sectors considered safer bets during times of economic uncertainty, such as food and beverage .SX3P and real estate .SX86P.
The exporter-heavy FTSE index was hit by a jump in the pound after the Brexit Party said it would not contest previously Conservative held seats in Britain’s upcoming election, in a boost for Prime Minister Boris Johnson.
Banks most exposed to Brexit news such as Royal Bank of Scotland (RBS.L) and Barclays (BARC.L) jumped about 4%, countering losses in some Asian-facing banks such as HSBC (HSBA.L) and Standard Chartered (STAN.L), down nearly 2%, after long-running Hong Kong protests turned violent.
Data earlier showed Britain’s economy grew at its slowest annual rate in nearly a decade in the third quarter, although the economy dodged outright recession.
“While the UK is being kept out of recession by surprisingly resilient consumer spending, the outlook for investment continues to look challenging as we move into 2020,” ING analysts said in a note.
“For now, we think the Bank of England will probably avoid cutting interest rates in the near term, although a lot depends on Brexit, and whether the jobs market deteriorates further.”
Ratings firm Moody’s warned on Friday it might cut its rating on Britain’s sovereign debt again, saying neither main political party was likely to tackle high borrowing.
The benchmark STOXX 600 rose to its highest in over four years last week on signs of progress in U.S.-China trade talks, but investors are wary about a deal after U.S. President Donald Trump said he had not agreed to rollbacks of U.S. tariffs sought by China.
“With European equities now up over 10% from their August lows, there is a case to be made that equity markets may be due a pause,” Morgan Stanley’s Graham Secker wrote in a note.
“While it is perfectly normal for investor sentiment to turn more quickly than the actual data, we doubt that we are on the cusp of a meaningful rebound in corporate profits either here in Europe or the U.S.”
European miners .SXPP took the biggest hit, down 1.4% after data from top metals consumer China showed producer prices fell the most in over three years in October.
London-listed shares of BHP Group (BHPB.L) (BHP.AX) slipped 2% after the company touted bullish plans to expand in oil and gas, defying investors who want the world’s biggest miner to cast off the business.
Spain's main IBEX index .IBEX closed flat after the weekend's parliamentary election pointed to a legislative stalemate.
Top gainer on the STOXX 600 was British takeaway food group Greggs (GRG.L), which jumped about 17% after forecasting a 2019 pretax profit ahead of previous expectations.
Shares in recent stock market debutant TeamViewer (TMV.DE), gained 3.6% after the German software company reported a near-doubling in core profits in the third quarter.
Reporting by Sruthi Shankar in Bengaluru; Editing by Shailesh Kuber and Mark Potter