Europe close: Stocks slip on geopolitical, trade tensions
Stocks on the Continent finished Monday's session in the red, weighed down by concerns that the trade spat between China and the US might be set to escalate and political tensions in Berlin that saw governing coalition partner CSU throw down the gauntlet to Chancellor Angela Merkel on immigration.
On Friday evening, Beijing responded in kind to the Trump administration's decision to levy tariffs on $50bn-worth of goods and now markets were waiting on the response from Washington.
A second round of 'tit-for-tat' tariffs on $100bn-worth of each other's goods by both nations could cut each country's rate of GDP growth by between 0.3-0.4% over the following 24 months, analysts at Oxford Economics said.
Commenting on the potential damage that might arise from such measures, Rebecca O'Keeffe at Interactive Investor said: "The current position on tariffs is unlikely to cause a full-blown rout for markets, but the prospect of further escalation and reprisals could cause considerable damage to the global economy, increasing the risks and anxiety."
By the end of trading on Monday, the benchmark Stoxx 600 was down by 0.83% or 3.22 points to 385.91, alongside a retreat of 1.36% or 176.44 points to 12,834.11 for the German Dax and a drop of 0.93% or 51.40 points to 5,450.48 on the Cac-40.
The FTSE Mibtel meanwhile was off by 0.41% or 91.18 points at 22,099.27.
Euro/dollar was essentially unchanged, trading at 1.16072.
Meanwhile, and on the political front, concerns were that a growing row between German government coalition partners CDU and CSU over immigration might see Merkel ousted or her leadership seriously undermined.
In order to resolve the dispute with her interior minister from the CSU, Horst Seehofer, who had threatened to block immigrants who had already registered in other European Union countries at the German border, Merkel had accepted a 1 July deadline on reaching a common EU-wide stance on the matter.
All eyes thus shifted now to the bloc's 28-29 June summit.
Analysts at Rabobank believed that a falling out between the CDU and CSU was unlikely; indeed, Seehofer's theatrics might be an attempt to head off the far-right AfD before regional elections in October, they said.
Barclays was of a similar view, telling clients: "In the case of snap elections, the most recent polls show that a Grand Coalition would no longer be able to achieve a majority. The CDU and SPD are therefore incentivized to compromise on this issue.
"While the Augsberger Allgemeine poll suggests that the CSU could gain in regional elections as a result of leaving the coalition, this would be far from certain in the resulting Federal elections. We thus believe that a breakdown of the Grand Coalition is less likely, as all parties are incentivized to maintain the status quo at Federal government level."
In other economic news, in its latest monthly bulletin, the Bundesbank predicted that the pace of growth in the German economy would accelerate in the spring following a "subdued" start to the year, as a flu epidemic abated and public outlays increased.
Germany's central bank also bumped its projection for economic growth in 2019 from 1.7% to 1.9%, although at 2.0% that for 2018 remained well below the 2.5% it had penciled-in in December.
Shares of Siemens were lower despite news that the engineering group had secured a £1.5bn contract to build 4 trains for the Piccadilly Line.