Trump’s Tariffs Lead Europe Stocks to Worst Month in Three Years

(Bloomberg) -- European equities haven’t had a month this bad since early 2016.

Weeks of jitters surrounding a Huawei ban and growth concerns culminated in President Donald Trump pledging to slap a 5% tariff on Mexican goods, hitting everything from European automakers to banks. The levies could rise to as high as 25%.

“In light of the trade negotiations going in the wrong direction, we can expect a cold summer for equities,” said Guillermo Hernandez Sampere, head of trading at German asset manager MPPM EK. “Tariffs on Mexico aren’t helping the sentiment and markets expect more to come, so the escape to safety will continue for the time being."

Car stocks, the region’s worst performers this month, are set for a 14% retreat in May as Fiat Chrysler Automobiles N.V. tumbled on Friday due to its extensive exposure to the North American Free Trade Agreement. Banking shares suffered as well, with Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA slumping because of the risk to their revenue from Mexico tariffs.

The Stoxx Europe 600 was down as much as 1.1% on Friday and was testing the 200-day moving average for the first time since February.

The latest data from Bank of America and EPFR Global showed that European equity funds carried on with outflows, losing $1.8 billion in the week through May 29.

--With assistance from Namitha Jagadeesh.

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jon Menon, Monica Houston-Waesch

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