LONDON: European stock markets dropped Thursday on intensifying concerns about the impact of an all-out global trade war between China and the United States.
US President Donald Trump's trade policy also faced market scrutiny Thursday after Washington slapped Russia with new sanctions over Moscow's alleged involvement in a nerve agent attack in Britain.
On currency markets the ruble extended Wednesday's losses and is now down more than four percent against the dollar after news of fresh US sanctions on Moscow.
And the pound also remains rooted near one-year lows on fears Britain will leave the European Union next year with no deal to trade with the bloc, with the country's trade secretary and central bank boss recently warning that the chances of such a scenario are increasing.
"The market is clearly getting more nervous over the possibility of a no-deal Brexit, which would be a messy outcome for the UK economy," said Rodrigo Catril, senior foreign exchange strategist at National Australia Bank.
Investors remain anxious about the global impact of a burgeoning US-China trade war between the world's two largest economic superpowers, and with the US midterm election looming in November.
Beijing said Wednesday it would impose 25 percent tariffs on $16 billion of US goods from August 23, retaliating in kind to a warning from US officials the day before and escalating a crisis that pits the world's top two economies against each other.
While the row has sent global markets into convulsions this year, the latest development had been widely expected, with Wall Street ending mixed.
"Investors are still wondering how quickly, if at all, the tariffs so far will start to affect companies and then economies," IG analyst Chris Beauchamp told AFP.
"We know the theory, but the actual developments will take time to become clear."
- 'Market resilience' -
"It is also not yet clear how far it (the trade war) will all run -- until the mid-terms? Or further until he can really get some key concessions from China," pondered Beauchamp.
"Market resilience over the past few weeks suggests investors have calmed down for the time being, at least where US equities are concerned."
Asian stocks however largely brushed off China's tit-for-tat response, with most markets rising on Thursday.
But in Europe the mood turned gloomy, as Frankfurt stocks fell 0.2 percent and Paris dropped 0.5 percent in early afternoon deals.
London shed 0.7 percent around midday as the British market was hit also by a number of companies going ex-dividend -- meaning the stock's owners are no longer entitled to the most recently declared dividend.
Added to the picture, the Kremlin on Thursday slammed as "unacceptable" the fresh US sanctions -- but said Russia still hopes for constructive relations with Washington.
"I don't think the Russia move is another front in the (trade) war, however, since Russia is the United States' 23rd largest partner, and thus not very high on the list," noted Beauchamp, adding that Trump was likely influenced by fears he was "being too soft on Moscow".
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