European stocks traded lower on Monday as investors reacted to the latest escalation in the U.S.-China trade war.
The pan-European Stoxx 600 fell about 0.4% during morning deals, with sectors and major bourses broadly in the red. European basic resources stocks, with their heavy exposure to China, fell 0.3%.
U.K. markets are closed due to a bank holiday.
Sentiment was shaken in the previous session as China announced plans to impose additional tariffs on $75 billion in U.S. goods, which was followed by President Donald Trump ordering American firms to find an “alternative” to operating in China.
Trump said his administration would raise existing duties on $250 billion worth of Chinese products to 30% from 25% on October 1, while levies on another $300 billion in Chinese goods, which will start to take effect on September 1, will now be 15% instead of 10%.
Traders were also keeping a close watch on the Group of Seven (G-7) summit in the Biarritz, France. The trade rift between the world’s two largest economies has clouded the meeting of world leaders, with Trump claiming he “could declare a national emergency” over the issue.
Also in focus was France’s plans to hit tech giants — including Facebook, Amazon and Google — with a 3% so-called “digital tax,” which has drawn the ire of Trump. The U.S. leader has threatened to tax French wine in response; European Council President Donald Tusk said over the weekend that Brussels would “respond in kind” if Washington imposes tariffs on France over the levy.
In terms of data, investors will be watching out for German business sentiment figures from Munich’s Ifo Institute. There are fears Germany could be headed for a recession after gross domestic product (GDP) shrank by 0.1% in the second quarter. A recession is typically marked two consecutive quarters of contraction, as well as general decline in economic activity.
Looking at individual stocks, Germany’s Deutsche Wohnen slumped 3% following reports on details of a planned rent cap in Berlin. IT consultancy Sopra Steria was another stock trading lower, with its shares down 2.6%.
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