European shares ended solidly lower on Friday, with major regional equity markets erasing their gains for the week as uncertainty surrounding U.S. trade policy once again weighed on sentiment and seemed to cloud the economic outlook.
Where are the major benchmarks trading?
The Stoxx Europe 600 Index SXXP, -0.80% fell 0.8% to 382.26 in its second straight daily drop. The day’s decline turned the pan-European index 0.3% lower for the week. For the month, it declined by 2.4% in its weakest monthly performance since March.
The euro EURUSD, -0.6770% fell sharply against the dollar, trading at $1.1599, compared with $1.1670 late Thursday. The dollar was supported by ongoing turmoil in emerging markets, as well as being seen as a safe-haven trade amid the political uncertainty.
Germany’s DAX DAX, -1.04% dropped 1% to 12,364.06. For the week, it fell 0.3%, bringing its August decline to 3.5%.
France’s CAC 40 Index PX1, -1.30% fell 1.3% to 5,406.85. It lost 0.5% for the week and 1.9% for August.
The FTSE 100 UKX, -1.11% fell 1.1% to 7,432.42, its third straight daily drop. The pound GBPUSD, -0.4151% traded at $1.2975, compared with $1.3009 late Thursday.
For the week, the FTSE fell 1.9%, a decline that took it to its lowest close since April. For August, it fell 4.1%, its biggest drop since August 2015.
Italy’s FTSE MIB stock index I945, -1.10% shed 1.1%. As has recently been the case, the country’s banks were among the biggest drags as investors fretted over the state of the country’s finances. Unione di Banche Italiane SpA UBI, -0.53% fell 0.5% and UniCredit SpA UCG, -1.30% was off 1.3%.
What drove trading?
Bloomberg on Thursday reported that U.S. President Donald Trump wants to move ahead with his plan to place tariffs on $200 billion in additional Chinese imports as early as next week. Companies have until Sept. 6 to comment on the proposed duties and Trump wants to impose the tariffs once that deadline passes.
In the same interview, Trump threatened to withdraw the U.S. from the World Trade Organization.
Separately, Trump rejected a recent offer from the EU to eliminate car tariffs if the U.S. did the same, calling it “not good enough.” In addition, U.S. and Canada officials remained apart on key points of contention in talks over a revised North American Free Trade Agreement, as they gathered for a fourth straight day to meet a White House-imposed deadline.
The tensions added to the geopolitical risk in the market, which is also fretting over Italy and the country’s high debt levels as it prepares a budget that could conflict with EU deficit rules.
The U.K.’s Brexit negotiations also remained in focus following a meeting between EU negotiator Michel Barnier and U.K. Brexit Secretary Dominic Raab, where they claimed progress, but found no agreement on the issue of the Irish border.
City A.M. late Thursday reported that EU member states were backing plans to give the EU’s chief Brexit negotiator more flexibility to settle the terms of the withdrawal agreement by the November deadline. The report comes days after EU negotiator Michel Barnier reportedly said the bloc was willing to offer the U.K. an unprecedented partnership, “such as has never been with any other third country.” Separately, The Times reported that French President Emmanuel Macron was pushing other EU leaders to make a deal with the U.K.
However, British foreign secretary Jeremy Hunt said he had thus far seen few signs of more openness to the U.K.’s proposals, the Guardian reported.
Read more: How a ‘no-deal Brexit’ could play out for U.K. stocks
What are market analysts saying?
“Even though the threat of these new tariffs is nothing new, the apparent lack of reluctance in looking to escalate the current dispute along with further threats by President Trump to withdraw from the World Trade Organization ‘if they don’t shape up’ has led to increasing investor reluctance to commit new money into global equities,” said Michael Hewson, chief market analyst at CMC Markets UK.
What stocks are in focus?
Whitbread PLC WTB, +14.33% surged 14% after Coca-Cola Co. KO, -0.85% said it would buy its coffee-shop chain Costa for $5.1 billion.
Sage Group PLC SGE, -7.78% said its chief executive officer had stepped down, and that its finance chief would step in on an interim basis. Shares fell 7.8%.
AstraZeneca PLC AZN, -1.95% fell 2% after it said a lupus treatment failed to meet its primary goal in a phase three trial.
Scandinavian airline SAS AB SAS, +11.21% surged 11% after it raised its full-year outlook and reported results.
Evonik Industries AG EVK, -0.59% said it was selling its U.S. Jayhawk site for a high double-digit million-dollar price. The move comes as the company is focusing its business on specialty chemicals. The stock fell 0.5%.
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