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Europe: Tariff threats on EU goods do little to curb gains in shares


[BENGALURU] European shares closed comfortably higher on Tuesday, with utilities and consumer stocks leading gains as investors brushed aside US President Donald Trump's threat to impose tariffs on an additional US$4 billion of EU goods.

The pan-European Stoxx 600 index rose 0.4 per cent in muted volumes, adding to its 0.8 per cent rise on Monday after the United States and China agreed to return to the negotiating table after a breakdown in trade talks in May.

Europe's main indexes had a subdued start on Tuesday as investors turned skeptical about a US-China trade deal after Mr Trump said any trade deal with China would need to be "somewhat tilted" in favour of the United States.

Offering little respite, the US government on Monday ratcheted up pressure on Europe by releasing a list of additional products - including olives, Italian cheese and Scotch whiskey - that could be hit with tariffs.

Trade-sensitive German shares underperformed. But investors largely seemed to have digested the news already, with the food and beverage index among the top gainers, up 1.2 per cent.

"EU tariffs are just a comment, not any actuality," Keith Temperton at Tavira Securities said.

"So for now it's fairly unimportant and tiny anyway," Mr Temperton said, adding the additional tariffs would be "a drop in the ocean."

Planemaker Airbus, however, fell 0.3 per cent as further tariff threats become the latest salvo in a long-running dispute over aircraft subsidies.

The Stoxx 600 index had its worst performance in more than two years in May after a sudden escalation in US-China trade tensions.

But stocks recouped most of their losses since then on hopes that major central banks would be more accommodative to counter the impact of the dispute. Developments on the trade front and central bank follow through will determine if July can maintain the momentum.

Utility stocks which tend to fare better in a falling interest rate environment rose 1.9 per cent on Tuesday, with Italian firms Italgas Terna and Hera up between 2.2 per cent and 3.5 per cent as 10-year government bond yields fell below 2 per cent.

Milan's main index rose 0.7 per cent with data showing that 2019 budget deficit was smaller than forecast.

This assuaged investor concerns as it meant the country probably complied with European Union fiscal rules this year and could possibly avoid disciplinary action over its growing debt.

Galapagos' shares jumped 5.2 per cent to scale a record high on positive news from its partner Gilead on a rheumatoid arthritis drug.

Meanwhile, Jupiter Fund Management dropped 8.5 per cent as investors booed its plan to consider naming Devon Equity as an adviser for its European Opportunities Trust.