European Stocks Slump as Trade Spat Hits Autos, Industrials

(Bloomberg) -- European stocks sank for a second day, mirroring a sharp pull-back in Asian shares, as the prospect of higher U.S. tariffs on Chinese goods looked increasingly likely, hammering cyclical sectors such as mining and autos.

The Stoxx Europe 600 Index retreated 0.7 percent, after falling 0.5 percent on Wednesday. Germany's exporters-heavy DAX index was down 1.7%. Gauges for basic resources and autos sectors were down 2.5 percent and 1.9 percent respectively. They have been the biggest casualties of the global trade tensions so far, with both sectors down about 12 percent since mid-June.

The latest flare up in the trade spat has also sent shock waves in the derivatives market, with the Euro Stoxx 50 Volatility Index, known as the VStoxx, jumping 28 percent so far this week, signaling a volatile start to August.

President Donald Trump has asked U.S. Trade Representative Robert Lighthizer to consider hiking the proposed tariff on $200 billion of Chinese goods to 25 percent from 10 percent, increasing pressure on Beijing.

“I don't think Mr. Trump will go ‘all in' but for the moment it keeps investors on the sidelines watching what's going on,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. “Let the shorties have their share of the game. We're in the middle of the reporting season and things don't look scary at all.”

The busy earnings week is nearing its end, with Rolls-Royce Holdings surging today 4.2 percent after saying that full-year earnings will be at the upper end of a forecast range. Siemens AG slumped 3.8 percent after its third-quarter business profit missed estimates.

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

To contact the editor responsible for this story: Blaise Robinson at brobinson58@bloomberg.net

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