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Europe: Stocks drop as China ups stakes in trade war with US

[BENGALURU] European stocks continued their decline on Monday, on the heels of this year's biggest weekly loss, as an escalation in the US-China trade war battered sentiment and prompted investors to shift into safer bets.

China said it would impose higher tariffs on most US imports on a revised US$60 billion target list, chilling risk appetite world over as it hit back at a tariff hike by Washington which came into force on Friday.

The pan-European STOXX 600 index dropped 1.2 per cent, with all sub-sectors apart from utilities declining.

Germany's trade-sensitive DAX dropped 1.5 per cent, while French shares fell 1.2 per cent. London-traded stocks fell to a two month closing low, down 0.6 per cent.

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Graham Secker, European equity strategist at Morgan Stanley, said the near-term worsening in the risk-reward outlook for equity markets, amid rising trade tensions, may drive more traditional defensive sectors to outperform.

Utilities stocks - oft-considered a defensive bet - rose 0.2 per cent. Centrica Plc rose 3 per cent as Britain's top energy supplier maintained its full-year outlook.

Oil and gas stocks dipped 0.1 per cent, saved from a steeper fall by Brent crude futures rising following attacks on vessels off the United Arab Emirates' coast.

Stocks of tariff-exposed auto-makers and their suppliers dived 2.7 per cent, as all stocks on the sector index fell.

The slide on the day took the sector index from outperforming the STOXX 600 in the year to date to underperforming the broad benchmark. While the STOXX 600 has added 10.3 per cent in 2019, auto stocks are now up 9.7 per cent.

The telecommunications index slid 2.2 per cent as all stocks on it fell. Vodafone Group led the decliners with a 5.2 per cent drop.

Berenberg cuts its price target on the London-listed firm, which was reportedly going to cut its dividend to pay for auctions for mobile phone airwaves in Germany and Italy.

Chemicals firms slid 1.3 per cent, with polymer maker Victrex Plc diving 7.2 per cent after warning annual growth could stall following a much weaker first half due to fewer automotive and consumer electronics contracts.

Banks slid 1.6 per cent, with Deutsche Bank and UBS falling 2 per cent and 2.1 per cent, respectively.

Talks between the German banking giant and the Swiss lender to tie up their asset management businesses have stalled, sources told Reuters, mainly over which bank would control the combined entity.

DWS, Deutsche's asset management unit, fell 3.3 per cent to its lowest closing level in a month and a half.

Thyssenkrupp shed 8.7 percent. Short-sellers scrambling to unwind their bearish bets had sparked a record gain in the German firm's stock on Friday, when it said it would embark on a fresh restructuring and list its elevators business.