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Europe: Shares dip as trade worries grow, banks shine


[MILAN] European shares abandoned early gains and closed in negative territory on Tuesday, 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 US$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 Securities.

"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," he added.

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 Italian ministers on forthcoming budget proposals.

Among Italian banks, which are seen as a proxy for political risk due to their large sovereign debt holdings, 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 3 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 the Spanish region of Catalonia also triggered positive moves in the country's banking sector.

CaixaBank, Bankinter, Bankia and Sabadel were the top shares in Madrid, up 4 per cent, 2.2 per cent, 1.5 per cent and 1.4 per cent respectively.

Danske Bank's woes weighed on its shares, which were down more than 6.2 per cent following a report suggesting its Estonian branch handled US$30 billion of non-residents' money in 2013.

ING Groep also fell, down 1.2 per cent, after news the Dutch bank will pay 775 million euros in a settlement with prosecutors, who accused it of having financial controls so poor that customers were able to easily launder money.

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