May 17, 2019 / 8:34 AM / a month ago

U.S.-China trade gloom casts heavy shadow on European stocks

(Reuters) - European stocks snapped a three-day winning streak on Friday amid global trade jitters after Beijing ratcheted up its war of words with Washington, while the end of Brexit talks between British political parties put a lid on risk sentiment.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 17, 2019. REUTERS/Staff

The Chinese Communist Party’s People’s Daily used a front page commentary to say the trade war would never bring China down, while talks on Brexit between Britain’s opposition Labour Party and the governing Conservatives ended without agreement.

The pan-European STOXX 600 index fell 0.4%, sliding from Thursday’s 10-day closing peak. The benchmark posted a 1.2% weekly gain, however, its best performance since early April.

Ben Lofthouse, head of global equity income at Janus Henderson, said investors “have moved from being slightly risk-on to risk off”.

“Markets don’t deal well with circumstances that are not well rehearsed. For global equities, trade is on people’s mind more than Brexit.”

Germany’s exporter-heavy DAX declined 0.6%, with BMW shedding 5.2% as its shares traded ex-dividend.

Milan-traded shares fell 0.2%, while peers in Paris and London edged 0.2% and 0.1% lower, respectively.

The process of the United Kingdom’s complex divorce from the European Union was jolted by the opposition Labour Party pronouncing the death of last-ditch talks due to deepening fractures in Prime Minister Theresa May’s government.

The news knocked sterling but supported the shares of exporters on the FTSE 100, as a softer pound broadly boosts the value of their overseas earnings.

Real estate stocks shed 1.2%, with Hammerson PLC down 2.2% following a price target cut on the stock by RBC.

Banks dropped 1.1% with the stocks of most lenders on the sector index ending lower. Italy’s Banco BPM fell 3.2%.

Stocks of auto-makers and their suppliers ended a fourth straight week lower as they dropped 1.1% on the day. The sector is especially sensitive to worsening U.S.-China trade tensions.

Paris-listed Valeo fell 1.7%, while Faurecia dropped 1.3%. Food delivery companies tumbled after Britain’s Deliveroo, which is unlisted, secured funding from Amazon.com Inc.

Just Eat sank 8.2%, while Amsterdam-listed Takeaway.com and Frankfurt-listed Delivery Hero shed 4.6% and 2.3% percent, respectively.

In a bright spot, EasyJet flew 5.3% higher after the budget carrier said it would meet 2019 expectations despite a weaker trading environment.

The stock boosted the travel and leisure index, which gained 0.8%.

Reporting by Medha Singh and Aaron Saldanha in Bengaluru, Josephine Mason in London; Editing by Gareth Jones

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