By Carla Mozee, MarketWatch
European autos index on course for worst session in a month
European stocks fell Friday, with auto and bank shares among
those losing ground as U.S. President Donald Trump threatened a
significant expansion in tariffs on Chinese imports, underscoring
concerns that a global trade war will crimp global economic growth
and corporate profits.
What markets are doing
On national indexes, Germany's DAX 30 index lost 0.5% to
12,628.26, and France's CAC 40 fell 0.5% to 5,391.68. The U.K.'s
FTSE 100 index turned lower, down 0.2% at 7,669.24.
In Madrid, the IBEX 35 declined 0.3% to 9,690.80. Italy's FTSE
MIB lost 0.5% to 21,779.66, shaken in part as Italian newspaper
Corriere della Sera reported that Claudio Borghi, the
budget-committee chief in the country's parliament, said Italy
would exit the euro sooner or later.
Overall, the Stoxx Europe 600 index fell 0.2% to 385.45 as basic
materials put in the worst performance. But health care and utility
stocks led advancers. The index on Thursday fell 0.2%
(http://www.marketwatch.com/story/european-stocks-drop-from-1-month-high-as-miners-slide-2018-07-19).
For the week, the index was tilting toward a 0.1% rise, which would
be enough for a third consecutive weekly gain.
The euro traded at $1.1659, up from $1.1644 late Thursday in New
York.
What's driving the market
European stocks extended losses after Trump, in an interview
with CNBC
(https://www.cnbc.com/2018/07/19/trump-says-hes-ready-to-put-tariffs-on-all-505-billion-of-chinese-.html),
said he's "ready" to put tariffs on all Chinese goods imported to
the U.S., which would amount to more than $500 billion. Trump had
previously said he's looking at targeting $200 billion in Chinese
imports, and that would be on top of tariffs already in effect
against the world's second-largest economy, to which China has
responded in kind.
Trump continued to hammer China and the EU in a tweet on
Friday:
(https://twitter.com/realDonaldTrump/status/1020287981020729344)
Trump's latest comments come after Thursday's threat of
"tremendous retribution
(http://www.marketwatch.com/story/trump-threatens-eu-with-tremendous-retribution-via-auto-tariffs-2018-07-19)"
against the European Union as he stood by a pledge to levy tariffs
on automobile imports. On Friday, the Stoxx Europe 600 Autos &
Parts Index slid 2.8%, on course for its worst session since June
21, FactSet data showed.
The EU has prepared measures to counter the proposed tariffs.
European Commission President Jean-Claude Juncker will be in
Washington on July 25 to discuss trade with Trump. Auto industry
representatives at a U.S. Commerce Department hearing Thursday
warned of the harm that auto tariffs will inflict on the
industry.
See: Trade tariffs mean companies will spend less on growing
their business in 2019, says Fitch
(http://www.marketwatch.com/story/trade-tariffs-mean-companies-will-spend-less-on-growing-their-business-in-2019-says-fitch-2018-07-19)
Meanwhile, European bank stocks were lower, pulling the Stoxx
Europe 600 Banks Index down 0.7%. The moves followed a selloff
Thursday in financial shares on Wall Street after Trump, in a CNBC
interview, said he's "not thrilled"
(http://www.marketwatch.com/story/trump-tells-cnbc-he-isnt-thrilled-with-fed-interest-rate-hikes-2018-07-19)
that the Federal Reserve is hiking interest rates as that could
undermine his administration's fiscal stimulus efforts. Higher
interest rates can help bolster bank profits, and some European
lenders have operations in the U.S. market.
What are strategists saying?
Trump's "bellicose comment" about more tariffs on Chinese goods
"turned a previously somnolent session into another red-soaked
mess, with the markets taking a dive almost immediately after the
interview went out," said Connor Campbell, financial analyst at
Spreadex, in a note.
"Interestingly the forex markets were completely placid.
Normally one would expect the dollar to act as something of a safe
haven following a trade war flare-up. Yet Trump undermined the
currency's recent super strength by attacking the Federal Reserve
and its interest-rate plans, meaning investors might not feel quite
as comfortable cosying up to the greenback this Friday," he
said.
Stocks in focus
In the auto group, shares of Volkswagen AG (VOW.XE) fell 2.8%,
Daimler AG (DAI.XE) slumped 2%, Peugeot SA (UG.FR) declined 2.9%
and Fiat Chrysler Automobiles NV (FCA.MI) gave up 2.7%.
Among banks, Societe Generale SA (GLE.FR) was off 1.6%, Banco
Santander SA (SAN.MC) moved 0.7% lower and Deutsche Bank AG
(DBK.XE) fell 1.2%.
Stora Enso Oyj shares (STERV.HE) tumbled 13% as the Finnish
paper and cardboard maker's second-quarter operational earnings
before interest and tax jumped 49% to EUR327 million, which fell
short of a EUR349 million FactSet consensus estimate.
Saab AB (SAAB-B.SK) climbed 5.8% after the Swedish aerospace and
defense company backed its guidance and said demand has remained
strong
(http://www.marketwatch.com/story/saab-profit-slides-on-fx-hit-still-backs-guidance-2018-07-20).
Saab did post a 28% drop in second-quarter net profit, hurt by
currency losses.
Beazley PLC (BEZ.LN) dropped 4.9% after the specialist insurer
said its first-half profit was hit by lower investment returns
(http://www.marketwatch.com/story/beazley-shares-fall-after-lower-returns-hit-profit-2018-07-20)
and rising insurance claims after series of natural disasters in
2017.
Remy Cointreau SA (RCO.FR) rose 2% as the French maker of Remy
Martin cognac, Mount Gay rum and other spirits said fiscal
first-quarter sales rose 5.9%
(http://www.marketwatch.com/story/remy-cointreau-sales-rise-backs-outlook-2018-07-20)
despite unfavorable currency effects.
Unilever PLC (ULVR.LN) gained 1.6% to GBP43.94, with Jefferies
and Berenberg each raising their price targets on the consumer
brands company following its earnings report.
(END) Dow Jones Newswires
July 20, 2018 09:23 ET (13:23 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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