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Europe: SocGen warning, Huawei frictions weigh on shares

[MILAN] A profit warning from Societe Generale and US frictions over Chinese tech giant Huawei weighed on European shares on Thursday, although the worries gradually faded and a rising Wall Street helped indexes pare losses or close a shade higher.

The pan-European Stoxx 600 index ended the day up 0.04 per cent after having traded in the red most of the session.

Germany's exporter-heavy DAX index fell 0.12 per cent and Britain's FTSE slid 0.4 per cent.

Societe Generale shares were the biggest losers within the banking sector and on the French blue chip index CAC 40, down 5.6 per cent.

The French bank said its fourth-quarter results would be affected by tough market conditions and the impact of some asset sales.

The warning hit European banking stocks, which fell 1.2 per cent.

"I have a preference for the US banks. SocGen shows how tough things are for European banks," said Jerome Schupp, fund manager at Geneva-based investment firm Prime Partners.

Italian banks limited their losses to a 0.7 per cent fall after a top government official said on Wednesday that mergers among Italian lenders could make the banking system more solid, as the sector seeks to further cut its bad loan pile.

Early trading was marred by worries that US action against Huawei could further complicate trade talks between Washington and Beijing at a time when signs of a global economic slowdown are growing.

"The severity of Thursday's losses, initially inspired by the fear that the announced US probe into Huawei would disrupt the trade talks between the country and China, seem to have been limited by the confirmation that Vice Premier Liu He will be coming to Washington for further discussions at the end of January," said Connor Campbell, an analyst for Spreadex.

Carmakers, which are highly sensitive to trade and have large exposure to both the Chinese and US economies, lost 0.8 per cent.

US Senate Finance Committee Chairman Charles Grassley said he thought US President Donald Trump was inclined to impose tariffs on European cars to win better terms on agriculture.

Austrian steelmaker Voestalpine was another heavy faller, sliding 4.7 per cent after another profit warning.