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Europe close: US-China trade concerns weigh on stocks

By Alexander Bueso

Date: Wednesday 12 Jun 2019

(Sharecast News) - Stock markets on the Continent remained mired in the red on Wednesday amid the ongoing trade stand-off between the US and China.
Speaking overnight, US President Donald Trump said he was only interested in a deal with Beijing if it was the same one as had been orignally struck earlier in 2019.

"We had a deal with China and unless they go back to that deal I have no interest," Trump said before leaving on a trip for Iowa, a well-known farm state.

"The spat between the two powers is playing out in a similar fashion to many other negotiations in [Trump's] life - an initial deal is rejected, followed up by tough language, but in the end a deal (probably similar to what was on the table in the first place) is finally signed," said IG's Chris Beauchamp.

"But the time between initial deal and final agreement can be a long one, and markets have already learnt the folly of expecting a resolution too soon," Beauchamp cautioned.

For their part, economists at Bank of America-Merrill Lynch were telling clients: "We still believe that a "trade peace" is the optimal outcome for both sides and therefore remain optimistic, but we have been wrong so far and it may take longer for "cool heads" to prevail."

Against that backdrop, by the end of trading the benchmark Stoxx 600 was down by 0.30% to 379.74, alongside a drop pf 0.33% to 12,115.68 for the German Dax, while Milan's FTSE Mibtel had given back 0.71% to 20,463.25.

Policymakers were also keeping a close eye on the trade situation, with European Central Bank governing council member, Francois Villeroy de Galhau, telling CNEWS he would be ready to do "whatever it takes to save the euro", but drew a distinction now and back in 2012, saying that "today the danger isn't a euro crisis. Today there is a threat to the global economy."

In his opinion, central banks could only attenuate the impact from trade tensions on growth, it was political leaders, especially the US President, who shares the greatest burden when it came to ending tensions.

On the corporate side of things, all eyes were on Spanish fashion giant Inditex and German publisher Axel Springer.

The former posted a 5% increase in sales for the three months to 30 April to reach €5.927m, but fell short of analysts' estimates for an increase of 8%.

However, the company's gross margins improved by 60 basis points from a year ago to hit 59.5% and management reiterated guidance for full-year like-for-like sales to be up by 4.0-6.0%.

Stock in Axel Springer rocketed higher alongside, adding 12.24% on news that US private equity outfit KKR had offered to buy out minority shareholders in the media outfit at €63 per share.

There was also fresh M&A news, with French industrial design software outfit Dassault announcing a move into the clinical trial technology space through the purchase of Medidata Solutions for roughly €5.04bn ($5.7bn).

There was little by the way of fresh economic news on the Continent.

In Spain, the national statistics office, INE, confirmed that the country´s harmonised rate of CPI slipped from 1.6% year-on-year in April to 0.9% for May, as expected.

Meanwhile, in France, INSEE reported a 0.4% or 93,800 person rise in non-farm payrolls for the first quarter to reach 25.33m.

As an aside, Standard&Poor's put out a note in which it predicted above average growth in Spain over the next two years, highlighting the deleveraging in the country´s corporate sector from its pre-financial crisis peak of 117% of GDP to 78%.

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