Europe: Trade war worries weigh on shares ahead of Federal Reserve meeting

[LONDON] European shares slid on Wednesday as worries over a possible trade war dented sentiment and investors awaited the conclusion of a US Federal Reserve meeting for signals on the pace of expected interest rate rises.

The pan-European Stoxx 600 index fell 0.2 per cent, as financials and industrials retreated, although it ended off lows, helped by strength among commodity stocks and a positive turn on Wall Street.

The Stoxx dropped sharply earlier in the afternoon following a report in the Wall Street Journal that China was planning counter-measures against US tariffs.

Fears of a possible trade war have simmered since US President Donald Trump announced plans to introduce tariffs on steel and aluminium imports.

"The Fed meeting is really the big event of the day. What we're looking out for most is the forward guidance ... it's how the accompanying statement is worded, whether it proves particularly hawkish, whether policymakers are guiding towards four rate hikes this year as opposed to three," said Henry Croft, research analyst at Accendo Markets.

Financials contributed the most to losses, with the European banking sector down 0.9 per cent, led lower by a 5.5 per cent drop in Deutsche Bank after negative comments from its CFO around the outlook for the first quarter.

Speaking at an investor conference, Deutsche CFO James von Moltke said he expected a 450 million euro (S$726 million) headwind for its Corporate and Investment Banking business in the first quarter.

European tech stocks advanced 0.3 per cent, propped up by gains among semiconductor makers.

The sector has seen little fallout so far from the reports of Facebook data misuse that have sent the US social media giant's shares down 10 per cent over the past two sessions.

French luxury goods maker Hermes jumped 2.4 per cent after its profit margin reached a record in 2017 and the company increased its dividend.

It was still doom and gloom in the British retail sector, with Kingfisher down 10.7 per cent after beating full-year earnings forecasts but warning that the UK market was"more uncertain".

Smaller UK stock Moss Bros, which makes men's suits and formal wear, tumbled 22.2 per cent after a profit warning while retailer Carpetright, up 0.9 per cent after touching a new all-time low, said that it was raising capital to try to turn its business around.

Ubisoft rose 3.8 per cent after Vivendi sold its entire stake in the video game maker for 2 billion euros. Ubisoft has long opposed the French media group's involvement in the company.

Vivendi's shares rose 0.7 per cent.

Elsewhere, Getinge fell 6.9 per cent after the Swedish medical technology group said it would book a 350 million crown provision in the first quarter related mainly to a fraud probe in Brazil.

UK retail landlord Hammerson, which has rejected a takeover approached from French shopping centre operator Klepierre, spiked higher in afternoon trading, rising 5.2 per cent to the top of the Stoxx.

Basic resources stocks reversed earlier losses to end up 1.7 per cent, leading sectoral gainers in the region, propped up by a rebound in metal prices.

A surge in crude oil prices to a six-week high following a surprise decline in US inventories boosted energy stocks, which ended up 1.3 per cent.

REUTERS