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European Stocks Drop as Trade Tension, Brexit Dial Up the Gloom

Europe's Stocks Open Steady as Tech, Miners Gain on Trade Talks

(Bloomberg) -- European stocks sank, snapping two days of gains, amid renewed trade tensions between China and the U.S. and as Brexit talks faced yet another impasse.

The Stoxx Europe 600 Index was down 0.9% as of 12:51 p.m. in London, with all industry groups lower. China indicated it would strike back after the U.S. blacklisted eight of its tech giants, while Bloomberg reported that the Trump administration is moving ahead with discussions about possible restrictions on capital flows into China, with a particular focus on investments made by U.S. government pension funds.

“There’s a clear escalation between the U.S. and China today, which doesn’t bode well for a deal later this week,” said Alexandre Baradez, chief market analyst at IG France. “A big chunk of the gains in European stocks this year has been on hopes of a trade deal, so clearly the risk is on the downside at this point.”

The drop in European stocks was broad based, with travel and leisure shares among the worst hit after EasyJet Plc postponed an update on its outlook for next year. Banks also tumbled, with both Deutsche Bank and Commerzbank down 3.8%.

In the U.K., Prime Minister Boris Johnson told German Chancellor Angela Merkel a Brexit deal is essentially impossible if the EU demands Northern Ireland should stay in the bloc’s customs union, sending the pound lower. The FTSE 100, which tends to have a negative correlation to the currency, fell 0.2%, while the more domestic-focused FTSE 250 index lost 0.9%.

Last week, European equities had their worst drop in two months as concerns about global growth sent investors running for the exit.

European Stocks Drop as Trade Tension, Brexit Dial Up the Gloom

Among the biggest movers, Qiagen NV tumbled 20% after reporting disappointing earnings and as its chief, Peer Schatz, decided to step down. Uniper SE dropped 7.5% after Fortum Oyj agreed to acquire a majority stake in the company.

To contact the reporters on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net;Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen

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