StockBeat: Markets Tumble on Trump's China Threats

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StockBeat: Markets Tumble on Trump's China Threats
Credit: © Reuters.

By Geoffrey Smith

Investing.com -- Stocks are in retreat all across Europe on Monday after U.S. President Donald Trump reignited fears of an all-out trade war between the U.S. and China.

At 4 AM ET (0800 GMT), the benchmark Euro Stoxx 600 was down 5.34 points, or 1.4% at 385.02

The French CAC 40 was the worst affected, losing 2.0%, while the German DAX was down 1.7%. The U.K. FTSE was closed due a public holiday.

They’re all following the Chinese market, which had its worst one-day loss in three years after Trump revived threats of raising tariffs on $200 billion of Chinese imports to 25% from 10%, as well as threatening to levy 25% tariffs on $325 billion more in Chinese goods previously unaffected by the dispute.

Trump’s threats represent a serious and surprising blow to market morale, after weeks of guidance from both U.S. and Chinese officials that an agreement on trade between the two countries was likely. They came only 48 hours after the monthly U.S. employment report showed the U.S. economy still performing well, adding more jobs than expected without any noticeable pick-up in inflation.

The U.S.-China angle is overshadowing domestic news. There was little reaction to the release of IHS Markit's Eurozone composite purchasing managers index, which showed that activity picked up marginally in April.

Stocks sensitive to global trade are among the worst losers, with German chemicals company BASF (DE: BASFN ) down over 7% (that's also due in part to its going ex-dividend) and French auto supplier Valeo (PA: VLOF ) down 4%. The big French and German automakers are all down, as is steelmaker ArcelorMittal, which announced sharp but notionally temporary cutbacks in European steel production earlier, citing the weak economic outlook, along with high electricity and carbon costs.

And the resilient ones? Utilities are performing well, with Spain’s Endesa (MC: ELE ) and Red Electrica (MC: REE ), France’s Engie (PA: ENGIE ) and Germany’s E.On (DE: EONGn ) all outperforming local indices.

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