UPDATE 2-European shares dip as trade worries grow, banks shine

  • Reuters
  • Stock Market News
UPDATE 2-European shares dip as trade worries grow, banks shine
Credit: © Reuters.

* STOXX down 0.75 pct

* Margin outlook cut hits WPP (LON: WPP )

* Italian banks rise as budget worries ease (Adds quotes, shares, closing prices)

By Danilo Masoni and Julien Ponthus

MILAN, Sept 4 (Reuters) - European shares abandoned early gains and closed in negative territory on Tuesday, as investors grew increasingly worried that the United States would slap new tariffs on Chinese imports and get the trade war in full swing.

The pan-European STOXX 600 index .STOXX ended the day down 0.75 percent after touching a two-month low during midday trading.

"Trade concerns continue to weigh on markets", said David Madden, an analyst at CMC Markets, as Washington could decide this week to tax an extra $200 billion of Chinese imports.

The worst performance was posted by British advertising group WPP, down 6.3 percent after the company said profitability would decline this year. is weak because there is a margin outlook cut for 2018 and the message is that turning around this behemoth is going to take time and be costly," said Neil Campling, Co-Head Global Thematic Group at Mirabaud Securities.

"There was also some hope that we might see quick progress on asset sales or merging of units but the message from the new CEO is not to expect wholesale changes," he added.

Telecom Italia TLIT.MI fell 5.4 percent after Exane BNP Paribas (PA: BNPP ) downgraded the stock to underperform from neutral, saying the market underestimated the threat from fibre competition. France, telecoms operator Iliad ILD.PA cut its mid-term profitability targets after suffering in the first half its first loss of mobile subscribers since the launch of its mobile business in 2012. However, its shares, which have already fallen more than 40 percent this year, rose 6.6 percent.

It was a good session for banks, with the sector's index .SX7P rising 0.7 percent, supported by strength among Italian lenders following soothing comments from Italian ministers on forthcoming budget proposals. Italian banks, which are seen as a proxy for political risk due to their large sovereign debt holdings, UBI Banca UBI.MI led the way, up 4.7 percent, while Unicredit CRDI.MI added 4.1 percent and BPER Banca EMII.MI rose 3.7 percent.

"We guess the ruling coalition doesn't want to (commit) suicide by presenting 2019 deficit targets near 3 percent compared to the 0.8 percent planned. We guess they will present something acceptable and incorporated in BTP and stock market prices," said Fidentiis in a note to clients.

Optimism on the political situation in the Spanish region of Catalonia also triggered positive moves in the country's banking sector.

CaixaBank CABK.MC , Bankinter BKT.MC , Bankia BKIA.MC and Sabadel SABE.MC were the top shares in Madrid, up 4 percent, 2.2 percent, 1.5 percent and 1.4 percent respectively.

Danske Bank's DANSKE.CO woes weighed on its shares, which were down more than 6.2 percent following a report suggesting its Estonian branch handled $30 billion of non-residents' money in 2013. Groep INGA.AS also fell, down 1.2 percent, after news the Dutch bank will pay 775 million euros in a settlement with prosecutors, who accused it of having financial controls so poor that customers were able to easily launder money. Scor SCOR.PA rose 9.5 percent after the French re-insurer rejected a friendly takeover offer by Covea.

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