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Europe: Shares dip as mixed earnings fail to dispel trade fears

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[LONDON] European shares retreated slightly on Wednesday as a mixed batch of corporate earnings failed to offset concerns about the US-China trade conflict and subdued euro zone manufacturing growth.

Caution was also palpable ahead of the Federal Reserve's decision, due on Wednesday after the European market close, with the US central bank expected to keep interest rates on hold before two hikes later this year.

The pan-European Stoxx 600 ended the session down 0.5 per cent while Germany's DAX also declined 0.5 per cent. France's CAC 40 gave up early gains to close 0.2 per cent lower.

Autos stocks were the biggest sectoral fallers, down 2.4 per cent as shares in Schaeffler DE, Volkswagen and Porsche fell as much as 5.1 per cent.

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Shares in Ferrari dropped 8.4 per cent after the company's CEO said that their financial targets to 2022 were "aspirational".

The autos sector has been hit particularly hard by uncertainty over global trade and tariffs.

"The latest round of tough rhetoric from the US regarding its trading relationship with China has rattled investor confidence," David Madden, market analyst at CMC Markets UK, said.

Basic materials were also on the back foot, down 1.6 per cent as copper prices slid following reports that the United States may propose a higher, 25-per cent tariff on US$200 billion of Chinese imports.

Rio Tinto added pressure on the sector as disappointing results sent its stock down 3.4 per cent despite news of an additional US$1 billion share buy-back.

British airline services company's BBA Aviation was another big faller, dropping 11.4 per cent after disappointing results.

On the upside, Air France-KLM rose more than 4 per cent after second-quarter results beat estimates despite recent strikes.

France's BNP Paribas reported forecast-beating second-quarter profits, though its shares gave up early gains to end 0.5 per cent lower.

"Q2 results don't give a big trigger for a major rebound," analysts at Jefferies said in a note, adding that they expect a better outcome in BNP Paribas' French retail bank to be visible in the second half of 2018.

In the UK, Lloyds Banking shone, rising 1.7 per cent after reporting a 23-per cent jump in first half pre-tax profit.

Apple's positive trading update was not enough to help tech stocks, with the sector losing 0.4 per cent.

In other earnings-related moves, Belgium's Telenet Group jumped 6.6 per cent after announcing an extraordinary dividend and supportive first-half results.

REUTERS