European shares abandoned early gains and closed in negative territory yesterday as investors grew increasingly worried that the United States would slap new tariffs on Chinese imports and get the trade war in full swing.

The pan-European STOXX 600 index ended the day down 0.75 per cent after touching a two-month low during midday trading. “Trade concerns continue to weigh on markets,” said David Madden, an analyst at CMC Markets, as Washington could decide this week to tax an extra $200 billion of Chinese imports.

The worst performance was posted by British advertising group WPP, down 6.3 per cent after the company said profitability would decline this year.

“WPP is weak because there is a margin outlook cut for 2018 and the message is that turning around this behemoth is going to take time and be costly,” said Neil Campling, Co-Head Global Thematic Group at Mirabaud.

“There was also some hope that we might see quick progress on asset sales or merging of units but the message from the new CEO is not to expect wholesale changes.”

Telecom Italia fell 5.4 per cent after Exane BNP Paribas downgraded the stock to underperform from neutral, saying the market underestimated the threat from fibre competition.

In France, telecoms operator Iliad cut its mid-term profitability targets after suffering in the first half its first loss of mobile subscribers since the launch of its mobile business in 2012. However, its shares, which have already fallen more than 40 per cent this year, rose 6.6 per cent.

It was a good session for banks, with the sector’s index rising 0.7 per cent, supported by strength among Italian lenders following soothing comments from ministers on the forthcoming budget.

Among the Italian banks, UBI Banca led the way, up 4.7 per cent, while Unicredit added 4.1 per cent and BPER Banca rose 3.7 per cent.

“We guess the ruling coalition doesn't want to [commit] suicide by presenting 2019 deficit targets near three per cent compared to the 0.8 per cent planned. We guess they will present something acceptable and incorporated in BTP and stock market prices,” said Fidentiis in a note to clients.

Optimism on the political situation in Catalonia also triggered positive moves in Spain’s banks.

CaixaBank, Bankinter, Bankia and Sabadel were the top shares in Madrid, up four per cent, 2.2 per cent, 1.5 per cent and 1.4 percent, respectively.

Elsewhere, Scor rose 9.5 per cent after the French re-insurer rejected a friendly takeover offer by Covea.


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