LONDON, Feb 1 (Reuters) - European equities were lower around midday on Monday, with energy shares falling on worries about Chinese demand and after President Barack Obama projected the U.S. budget deficit would soar to a fresh record in 2010.
At 1207 GMT, the pan-European FTSEurofirst 300 index was down 0.5 percent at 1,007.01 points.
In January the index suffered its worst monthly loss since February 2009, knocked by mounting worries over Greece's debt and the prospect of more regulation on the banking system. However, it remains up more than 56 percent from its lifetime low of March 9. "(The direction of the market) will depend on key factors such as whether or not Greece's restructuring plan is credible, and other political factors, such as regulatory intervention in the banking sector," said Andy Lynch, fund manager at Schroders.
Oil stocks slipped, with crude prices having fallen 8 percent in January, the biggest percentage drop since December 2008.
BP fell 0.8 percent, ahead of results on Tuesday. Total, ENI , BG and Royal Dutch Shell fell between 0.6 and 1.3 percent. On the macroeconomic front, China's manufacturing powered ahead in January, providing more evidence of its robust economic health.
But Beijing's moves last month to rein in rapid growth and curb inflationary pressures have sparked fears that such measures could impede a still-weak global economic recovery and curb Chinese demand for energy and commodities.
Across Europe, the FTSE 100 index was flat; Germany's DAX was down 0.1 percent and France's CAC 40 fell 0.3 percent.
BANKS ADVANCE
Banks extended gains from Friday. Banco Santander, Barclays , Credit Suisse, Deutsche Bank, HSBC and Standard Chartered rose between 0.9 and 2.2 percent.
But UBS fell 1 percent after the Swiss justice minister said the economy would suffer if the Swiss bank collapsed as a result of its unresolved U.S. tax dispute.
Among individual stocks, Tenaris lost 4.9 percent. The company is expected to post a 30 percent fall in 2009 revenues and a 40 percent fall in EBITDA, Il Sole 24 Ore said in its 'Letter to the Investor' column on Sunday.
Vivendi fell 3.4 percent after the French media and telecommunications giant was found guilty of misleading investors by a U.S. jury on Friday.
On the upside, Irish airline Ryanair rose 5.7 percent as the company increased its profit forecast for the year after a narrower-than-expected third-quarter net loss.
British Airways, which is due to issue a trading update on Friday, rose 3.3 percent on optimism that its proposed tie-up with American Airlines and Iberia was moving closer to gaining approval from the European Commission.
Investors will look at U.S. December personal income and personal consumption numbers, scheduled for release at 1330 GMT.
Also on Monday, U.S. President Barack Obama's budget for the fiscal year to Sept. 30, 2011, which must be approved by the U.S. Congress, forecast a deficit of $1.56 trillion in 2010, equal to 10.6 percent of gross domestic product. He is seeking to strike a balance between taming skyrocketing deficits and giving the economy a boost to ease the pain of double-digit unemployment.
Schroders' Lynch said: "It's well known the deficit is cataclysmically awful, but if it was cut too rapidly, we could run the risk of going back into recession."
