EUROPE MARKETS: European Stocks Finish At 3-week Low As U.S.-China Trade Tensions Escalate
19 Juni 2018 - 07:28PM
Dow Jones News
By Carla Mozee, MarketWatch
Tit-for-tat tariff threats unsettle markets
Investors knocked European stocks to a near three-week low
Tuesday, after U.S. President Donald Trump indicated his
administration was looking to hit China with further tariffs on
$200 billion in imported goods, ramping up trade tensions between
the world's two largest economies.
How markets performed
The Stoxx Europe 600 Index dropped 0.7% to end at 383.21,
marking its lowest close since May 31, even as it managed to pare
an intraday loss of 1.3%. The basic materials and tech sectors fell
by the most, but utilities turned higher. On Monday, the
pan-European index logged a 0.8% drop
(http://www.marketwatch.com/story/european-stocks-slump-as-merkel-comes-under-pressure-in-germany-2018-06-18).
Germany's DAX 30 index retreated 1.2% to 12,677.97, extending
Monday's 1.4% decline as German Chancellor Angela Merkel's
governing coalition remained under pressure over the issue of
immigration. France's CAC 40 index fell 1.1% to 5,390.63, the
lowest finish since April 18.
But Italy's FTSE MIB index ended 0.1% lower at 22,084.33, but
gains for bank stocks help the index pare an intraday decline of
more than 1%. Spain's IBEX 35 also fell by more than 1% during the
session but closed down 0.1% at 9,755.40.
The U.K.'s FTSE 100 gave up 0.4%
(http://www.marketwatch.com/story/ftse-100-drops-as-us-china-trade-fight-intensifies-2018-06-19)
and wrapped up the session at 7,603.85.
The euro pulled back to $1.1571, compared with $1.1624 late
Monday in New York. The shared currency stepped lower during the
session after European Central Bank President Mario Draghi
reiterated the central bank's dovish message on monetary policy,
indicating that it could extend its bond-buying program if
necessary
(http://www.marketwatch.com/story/ecbs-draghi-says-bank-could-extend-qe-if-warranted-2018-06-19).
That program is set to end in December.
What drove markets
A slide in Asian equities on the back of the increasing trade
tensions set the tone for European stocks. The Shanghai Composite
fell 3.8%, and the Shenzhen index tanked 5.8% in Asian trade after
Trump threatened more tariffs on more Chinese goods
(http://www.marketwatch.com/story/trump-seeks-additional-200-billion-in-tariffs-against-china-and-threatens-even-more-2018-06-18).
Meanwhile on Wall Street, the Dow Jones Industrial Average faced
losing the gains it's made in 2018.
(http://www.marketwatch.com/story/dow-futures-slump-more-than-300-points-as-fears-of-a-us-china-trade-war-ratchet-up-2018-06-19)
Trump said "further action must be taken to encourage China to
change its unfair practices, open its market to United States
goods, and accept a more balanced trade relationship," in a
statement late Monday. Beijing responded by threatened tariffs of
its own on another batch of U.S. products
(http://www.marketwatch.com/story/china-threatens-further-tariffs-on-us-products-as-trade-conflict-escalates-2018-06-19),
state-run Xinhua News Agency reported.
The Stoxx Europe 600 Basic Resources Index , which includes
mining stocks, stumbled 2.5%, lagging other sector indexes.
Analysts have said a trade war could lead to reduced demand for
industrial and precious metals, and China is the world's largest
buyer of copper.
Tech stocks dropped despite a report that U.S. tariffs would
spare iPhones produced in China
(http://www.marketwatch.com/story/asian-markets-sink-led-by-apple-suppliers-on-trumps-latest-tariff-threat-2018-06-18).
Read:Escalating U.S.-China trade spat comes at a bad time for
global growth, economist says
(http://www.marketwatch.com/story/escalating-us-china-trade-spat-comes-at-a-bad-time-for-global-growth-economist-says-2018-06-15)
What strategists are saying
"This latest escalation, if it materialized, would mean
significant economic impact in China, the U.S. and elsewhere at a
sensitive time for the global economy. It will not be easy for the
U.S. to identify$200 billion of imports from China to levy tariffs
on without hurting U.S. companies and/or consumers, given the
strong involvement of U.S. companies in a large share of China's
exports to the U.S.," said Louis Kuijs, head of Asia economics at
Oxford Economics, in a note.
"While there is in principle still room for negotiation,
attitudes seem to be hardening on both sides. The new U.S.
initiative calls for a domestic process similar to the one followed
with the initial tariff proposals, including consultation. This
means it will take a few months before the new tariffs would be
imposed," Kuijs added.
Stock movers
Among mining stocks, which would feel the pain on reduced metals
demand from China, Anglo American PLC (AAL.LN) fell 2%, Antofagasta
PLC (ANTO.LN) lost 1.6%, and steel maker ArcelorMittal PLC (MT)
fell 3.8%.
Elsewhere, shares of Volkswagen AG (VOW.XE) (VOW.XE) fell 2.4%
following the arrest of Audi's chief executive, Rupert Stadler, on
Monday over emissions-test cheating. Prosecutors jailed the head of
VW's luxury unit without bail on worries he might try to interfere
in a probe into whether he was involved in the diesel-emissions
cheating scandal.
(END) Dow Jones Newswires
June 19, 2018 13:13 ET (17:13 GMT)
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