European shares dip on latest Trump tariff threat

By Danilo Masoni

MILAN (Reuters) - European shares fell on Friday after U.S. President Donald Trump warned of further tariffs on China, although the losses were limited by gains among defensive stocks like utilities.

The pan-European STOXX 600 (STOXX) fell 0.5 percent by 07.58 GMT, erasing part of Thursday's 2.4 percent gain. It remained on track for a weekly advance of 0.9 percent. Germany's exporter-heavy index DAX (GDAXI) fell 0.7 percent.

Trump on Thursday directed U.S. trade officials to identify another $100 billion of tariffs on Chinese imports, escalating a confrontation between the world's two largest economies. However, investors remained doubtful that a full-blown trade war would break out.

"Markets will now watch both the rhetoric from Trump's cabinet members and China's response to assess whether risk of a trade war is materially higher," Credit Suisse (SIX:CSGN) said. "We continue to see a trade war as unlikely".

Caution still dominated, boosting defensive stocks. French utility Suez (PA:SEVI) led the sector higher, up 2.8 percent, further boosted by a bullish broker note.

Elsewhere among top movers, Dufry (S:DUFN) rose 3.5 percent after the Swiss retailer proposed a higher-than-expected dividend and announced a share buyback.

UK's Marks & Spencer (L:MKS) fell 3.3 percent and Next (L:NXT) lost 2.1 percent after Citi downgraded both stocks, among other retailers.

Telecom Italia (MI:TLIT) rose 2.2 percent after Italian state lender CDP said it would buy a stake of up to 5 percent in the telecoms company.

Chip makers like Infineon (DE:IFXGn) fell after losses overnight by Samsung Electronics (LON:0593xq) shares (KS:005930). The South Korean tech giant was hit by growing concern that a semiconductor boom is about to end.

The trade-exposed auto sector (SXAP) was the leading sectoral loser, down 2 percent.

Later in the day, the focus will turn to the U.S. jobs report for more clues on how fast monetary policy will normalise in the United States.

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That could affect the outlook for the dollar, whose weakness has pushed up the euro, clouding prospects for European earnings. According to the Thomson Reuters IBES data, first- quarter earnings growth for the STOXX is seen at 3.4 percent, compared with 18.5 percent for the S&P 500.