By Carla Mozee, MarketWatch
European stocks fell Friday, with auto shares among those that lost ground as U.S. President Donald Trump threatened a significant expansion in tariffs on Chinese imports, underscoring concerns that a global trade war will crimp global economic growth and corporate profits.
How markets moved
On national indexes, Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX -0.59% slumped 1% to end at 12,561.42, hurt in part by auto makers. France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +0.15% fell 0.4% to 5,398.32. The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.28% turned lower, finishing down by 0.1% at 7,678.79.
Italy’s FTSE MIB /zigman2/quotes/210598024/delayed IT:I945 -0.21% lost 0.4% to 21,794.60, shaken in part as Italian newspaper Corriere della Sera reported that Claudio Borghi, the budget-committee chief in the country’s parliament, said Italy would exit the euro sooner or later.
In Madrid, the IBEX 35 /zigman2/quotes/210597995/delayed XX:IBEX +1.14% reversed course and ended up by 3.70 points at 9,724.80.
Overall, the Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.07% fell 0.2% to end at 385.62 as the basic materials group put in the worst performance. But health care and consumer goods stocks led advancers. The index on Thursday fell 0.2%. For the week, the index rose by 0.2%, enough for a third consecutive weekly gain.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.2243% traded at $1.1707, up from $1.1644 late Thursday in New York.
What drove the market
European stocks extended losses after Trump, in an interview with CNBC , said he’s “ready” to put tariffs on all Chinese goods imported to the U.S., which would amount to more than $500 billion. Trump had previously said he’s looking at targeting $200 billion in Chinese imports, and that would be on top of tariffs already in effect against the world’s second-largest economy, to which China has responded in kind.
Trump continued to hammer China and the EU in a tweet on Friday:
Trump on Friday accused China of manipulating its currency, as a weaker yuan makes Chinese products cheaper for customers to purchase. The yuan /zigman2/quotes/210561991/realtime/sampled USDCNY -0.2181% fell by the most in two years after the People’s Bank of China on Thursday guided the Chinese currency 0.9% lower by setting the dollar’s reference rate at 6.7671 yuan.
Trump’s latest comments come after Thursday’s threat of “tremendous retribution” against the European Union as he stood by a pledge to levy tariffs on automobile imports. On Friday, the Stoxx Europe 600 Autos & Parts Index /zigman2/quotes/210599241/delayed XX:SXAP -1.56% slid 2.1%, its worst session since June 28, FactSet data showed.
The EU has prepared measures to counter the proposed tariffs. European Commission President Jean-Claude Juncker will be in Washington on July 25 to discuss trade with Trump. Auto industry representatives at a U.S. Commerce Department hearing Thursday warned of the harm that auto tariffs will inflict on the industry.
See: Trade tariffs mean companies will spend less on growing their business in 2019, says Fitch
What are strategists saying?
Trump’s “bellicose comment” about more tariffs on Chinese goods “turned a previously somnolent session into another red-soaked mess, with the markets taking a dive almost immediately after the interview went out,” said Connor Campbell, financial analyst at Spreadex, in a note.
“Interestingly the forex markets were completely placid. Normally one would expect the dollar to act as something of a safe haven following a trade war flare-up. Yet Trump undermined the currency’s recent super strength by attacking the Federal Reserve and its interest-rate plans, meaning investors might not feel quite as comfortable cosying up to the greenback this Friday,” he said.
Stocks in focus
In the auto group, shares of Volkswagen AG /zigman2/quotes/204309985/delayed DE:VOW3 -1.55% fell 2.3%, Daimler AG /zigman2/quotes/201850364/delayed XE:DAI -1.85% slumped 2.4%, Peugeot SA /zigman2/quotes/203546414/delayed FR:UG -4.21% declined 2.4%, and Fiat Chrysler Automobiles NV gave up 2.3%.
Stora Enso Oyj shares /zigman2/quotes/201270972/delayed FI:STERV -0.09% tumbled 13.5% as the Finnish paper and cardboard maker’s second-quarter operational earnings before interest and tax jumped 49% to €327 million, which fell short of a €349 million FactSet consensus estimate.
Saab AB /zigman2/quotes/205144954/delayed SE:SAAB.B -1.36% jumped 7.5% after the Swedish aerospace and defense company backed its guidance and said demand has remained strong. Saab did post a 28% drop in second-quarter net profit, hurt by currency losses.
Beazley PLC /zigman2/quotes/209655690/delayed UK:BEZ -0.12% dropped 1.5%, but ended off session lows, after the specialist insurer said its first-half profit was hit by lower investment returns and rising insurance claims after series of natural disasters in 2017.
Remy Cointreau SA /zigman2/quotes/206802273/delayed FR:RCO +0.65% rose 2.8% as the French maker of Remy Martin cognac, Mount Gay rum and other spirits said fiscal first-quarter sales rose 5.9% despite unfavorable currency effects.
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