UPDATE 2-European shares pressured by U.S.-China trade jitters

  • Reuters
  • Stock Market News
UPDATE 2-European shares pressured by U.S.-China trade jitters
Credit: © Reuters.

* STOXX 600 clocks lowest close in a month and a half

* All STOXX 600 sub-sectors apart from real estate fall

* Auto-makers and suppliers' stocks drop 2.9 pct

* U.S. hike on Chinese goods to go in effect between trade talks (Updates to close, adds graphic, market analyst's quote, recasts)

By Aaron Saldanha

May 9 (Reuters) - European shares slid on Thursday, with investors exiting positions in favour of safer assets as they waited to see if U.S.-China talks will yield tangible results and help avert worsening trade ties which threaten to slow global growth.

An increase in U.S. tariff on imports from China is set to be triggered on Friday, while Chinese Vice Premier Liu He starts two days of talks in Washington on Thursday. His country has asked the United States to meet it halfway to salvage a deal. U.S. President Donald Trump's insistence that China "broke the deal" and Beijing's response that it would retaliate against a planned U.S. tariff increase dampened the prospect of a trade agreement which would calm investors' nerves. MKTS/GLOB

The pan-European STOXX 600 index .STOXX fell 1.7 percent to clock a 1-1/2 month closing low as almost all sectors declined, while the volatility gauge on euro zone blue-chips .V2TX hit its highest in more than four months during the day.

"European equity markets are in turmoil... Europe is getting hit in the cross-fire because when the two largest economies in the world engage in a trade war, it bodes badly for everyone," David Madden, market analyst at CMC (NS: CMC ) Markets UK, wrote in a note.

Trade-sensitive German stocks .GDAXI declined 1.7 percent in their biggest one-day fall in three months. Paris-traded equities .FCHI gave up 1.9 percent, while their peers in Milan .FTMIB eased 1.8 percent.

Stocks of auto-makers and their suppliers .SXAP tumbled 2.9 percent.

Automotive supplier Continental's shares CONG.DE dived 5.3 percent. It reported a 22 percent slump in net profit on slowing global car demand and said its powertrain division's spin-off will depend on the auto market recovering. shares .SX8P dropped 2.3 percent, with all but two stocks on the sector's index ending lower.

Tariff-sensitive auto and tech stocks have significantly underperformed the STOXX 600 this month amid worsening U.S.-China trade ties, as shown by the chart below.

Shares of luxury goods firms, broadly reliant on China for growth demand, dropped. Gucci owner Kering PRTP.PA fell 2.7 percent, while Paris-listed Hermes International HRMS.PA dropped 1.8 percent.

Bank shares .SX7P fell 2.3 percent, with each lender's stock falling. Italy's Banco BPM BAMI.MI dived 8.2 percent after a slide in revenues dragged down its profits. growth concerns being the theme of the day, ArcelorMittal MT.AS shares dived 6.1 percent after the steelmaker cut demand forecast for its key markets and said it was facing the twin challenges of lower steel prices and lower consumption in Europe. estate .SX86P stocks, broadly considered a defensive sector, were the rare bright spot on the day as they tacked on 0.4 percent.

Leg Immobilien AG LEGN.DE climbed 2.9 percent, as it confirmed its goal for a core earnings margin of 73 percent in 2019. Rebased performance of STOXX 600 versus its auto and technology sub-sectors in the month to May 9, 2019; as at 1517 GMT



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