MILAN: European shares fell on Friday with autos and basic resources stocks bearing the brunt of a wide sell-off triggered by mounting worries that US tariffs on up to $60 billion of imports from China could escalate.
All sectors were trading in negative territory, sending pan-regional STOXX 600 benchmark index falling for a second day, down 1.4 percent to its lowest level since February 2017.
All eyes were on the response from China, which urged the United States on Friday to "pull back from the brink", and unveiled its own plans to impose tariffs on up to $3 billion of US imports.
Although risks that the tariffs could trigger a full-blown trade war, some investors said they still did not expect that to happen, highlighting that the retaliation measures announced by China remained relatively mild.
Caution, however, pushed investors into defensive stocks like utilities and telecoms, which declined by less than 1 percent but outperformed the broader market, as they are seen as less exposed to a deterioration in global trade.
Euro zone indexes including the export-sensitive DAX also fell more 1.8 percent but remained above early March lows, while the FTSE dropped 1.1 percent to fresh 15-month lows reached on the back of a strengthening pound.
"Our central scenario remains one in which retaliation will be contained and will leave little impact on growth, but the risk of it happening alone is enough for us to maintain a preference for defensive assets," said UniCredit economists led by Chiara Silvestre in a note.
Enel fell 0.2 percent after Italy's biggest utility reported growth a 14.4 percent growth in its 2017 ordinary net profit last year that to beat its own guidance.
Among the few gainers on Friday were shares in metal miners Fresnillo, Randgold and Polymetal , all up between 0.5 and 1.5 percent, as the gold price rose on the back of growing demand for safe haven assets.
Still on the tariff front, the previously announced US tariffs on steel and aluminium imports will take effect on Friday but more countries, including the European Union, have obtained a temporary exemption.
"In theory it would be a soothing news but in reality it risks making the confrontation between the U.S and China harsher," said JCI Capital fund manager Alessandro Balsotti.
Among the companies, exposed to US steel and aluminium tariffs, shares in carmakers Fiat Chrysler and BMW fell 2.5 and 2.1 percent respectively, while steel tube maker Tenaris dropped 4.1 percent and ThyssenKrupp declined 2.7 percent.
Elsewhere in corporate arena, Indivior plunged 4.4 percent following an US court ruling against the maker of opioid addiction treatment Suboxone. Indivior said it intended to appeal against the ruling in favour of generic competitor Alvogen.
Among the few gainers, GSK rose 2.9 percent after it pulled out of the bidding war for Pfizer's consumer health business following in the footsteps of Reckitt Benckiser earlier this week.
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