Europe Markets: European stocks give up gains as U.S.-China trade war kicks in

Europe Markets: European stocks give up gains as U.S.-China trade war kicks in

European stocks turned lower Friday, paring a potential gain for the week, as the U.S. and China kicked off a trade war by implementing promised import tariffs.

How markets are moving

The Stoxx Europe 600 index SXXP, -0.25%  fell 0.2% to 380.82, giving up a modest gain, as the oil and gas and financial sectors led decliners. But the telecom sector topped advancers. The pan-European index on Thursday rose 0.4%, for a third consecutive session of gains.

The swing lower was whittling down the Stoxx 600’s gain for the week to just 0.2%. But that amount would be enough for the index’s first advance in three weeks.

Germany’s DAX 30 index DAX, -0.20% fell 0.2% to 12,437.60. In Paris, the CAC 40 index PX1, -0.25% shed 0.2% to 5,356.96, and in London, the FTSE 100 index UKX, -0.35%  turned down 0.4% to 7,577.07.

The euro EURUSD, +0.5303% traded at $1.1744, up from $1.1693 late Thursday in New York.

What’s driving the market

The U.S. implemented tariffs on $34 billion in Chinese imports as of 12:01 a.m. Eastern Time, seen as the start of a trade war between the world’s two biggest economies. As promised, Beijing has responded in kind, with levies on the same value of 545 U.S. goods, including agricultural products, vehicles and aquatic products.

Just ahead of the tariff action, U.S. President Donald Trump threatened to escalate the trade tensions by imposing further duties on more than $500 billion in Chinese imports — roughly the amount of total goods the U.S. imported from China last year.

Read: What’s the play as the trade-war starter gun goes off? Buy the news

European blue-chips remained lower after the release of the U.S. Labor Department’s June nonfarm payrolls report. The jobs report can have implications on pricing for U.S. interest-rate expectations, and sway assets prices worldwide. A larger-than-expected 213,000 new jobs were created last month, and the unemployment rate unexpectedly rose to 4% from 3.8%.

Check out: How low can U.S. unemployment go? What to watch in the June jobs report

Meanwhile, U.K. Prime Minister Theresa May and her cabinet ministers are meeting at Chequers, May’s official country house retreat, to discuss Brexit strategy, as European Union leaders’ patience runs short. Airbus Chief Executive Tom Enders told reporters Friday that the British government has “no clue” how to pull off Britain’s exit from the European Union without harming businesses.

Airbus has warned that it will likely leave the U.K. if it leaves the EU’s single market, considered a hard Brexit.

What strategists are saying

“There is limited evidence so far that protectionist measures are derailing the global economy, but growth risks are skewed towards the downside over the summer,” said Mark Cliffe, chief economist at ING, in a note. “On their own, we are probably talking an impact measured in only one or two-tenths of a percentage point on global growth,” he said.

“However, the impact on financial markets and economic confidence may be much larger and lead to a more substantial slowdown in activity. Steep equity market falls and a downturn in investment and job creation could trigger a greater willingness to compromise. However, we doubt President Trump will change tack before the 6 November mid-term elections,” Cliffe added.

Stock movers

Deutsche Bank AG shares DBK, +2.01%  were up 2.6%, off session highs, after German weekly Wirtschaftswoche reported that J.P. Morgan Chase & Co. JPM, -0.29%  and Industrial and Commercial Bank of China Ltd., or ICBC, are considering buying a stake in Germany’s largest lender. But J.P. Morgan Chase denied any interest in Deutsche Bank.

Inmarsat PLC ISAT, -4.83%  dropped 5.4%, but pared losses, after the British satellite-communications company rejected an improved buyout offer from EchoStar Corp. SATS, +0.42%  , which is now courting the company’s board. The higher bid valued Inmarsat at 2.45 billion pounds ($3.24 billion).

Thyssenkrupp AG TKA, -2.43%  rose 1% after Chief Executive Heinrich Hiesinger late Thursday submitted his resignation, spurring hopes for a change in direction at the company. The move comes less than a week after the German industrial group reached a deal to merge its European steel operations with Tata Steel Ltd. 500470, +0.22%  .

Assa Abloy AB ASSAB, -7.56%  sank 7.4% after Swedish lock maker warned of one-off costs in its second-quarter results.

Share of auto makers mostly fell as the U.S. and China tariff measures came in, as the Stoxx Europe 600 Autos and Parts Index SXAP, -1.13%  dropped 1.1%

Shares of Daimler AG DAI, -1.15% moved 1.2% lower, Volkswagen AG VOW3, -1.45% lost 1% and Renault AG RNO, -2.17%  shed 2.1%. Fiat Chrysler Automobiles NV shares FCA, -1.87% declined 1.9%, and Peugeot UG, -1.54%  fell 1.4%.BMW AG BMW, -1.03% gave up 0.5%,

Airbus SE AIR, +0.74%  were up 0.7% after the aerospace industry heavyweight said it will meet its full-year delivery targets, despite some lag during the first half of the year.

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