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Europe: Stocks slump to 2-month low as US-China spat escalates

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[MOSCOW] European stocks slid for a third straight session as investors fretted over growing trade tensions between the US and China.

The Stoxx Europe 600 Index fell 1.2 per cent, to the lowest level in almost two months, led lower by miners, tech and automakers, seen among the sectors most at risk of a trade war. Mining shares were particularly hit as steel and iron ore plunged 3.5 per cent and 5 per cent, respectively, while exporters-heavy DAX sank 1.6 per cent. Debenhams slumped as much as 20 per cent to a record low after the British department-store owner cut its full-year profit forecast.

"Every asset class is affected now by the US-China trade war and the lack of volume helps those investors who put their bets on falling markets," said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. "I don't see an overall change yet, Europe still has value, especially the large caps. I wouldn't call this a bloodbath, it's more a market response to the current cacophony."

Investors continue to focus on the trade spat between China and the US after US President Donald Trump directed his trade representative to identify US$200 billion worth of Chinese goods to be subject to additional tariffs. Oil dropped below US$66 a barrel as traders assessed Opec's discussions on a compromise over an output increase.

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While the US$50 billion in tariffs already announced on Friday were mainly on industrial goods, the broader move would push up prices for toys, tools, t-shirts and a lot more for US shoppers.

Vanguard FTSE Europe ETF, the biggest exchange-traded fund focused on the region's equities, had an outflow of US$495 million last week, the biggest redemption since July 2016, when European markets tumbled following the Brexit referendum.

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