3-2-18 6:15 AM EST | Email Article

By Carla Mozee, MarketWatch

Shares of steel and car makers among Friday's losers after Trump's levy announcement

European stocks slid Friday, with shares of steel makers among those hit hard. The losses came after President Donald Trump said he's imposing tariffs on steel and aluminum imports to the U.S., sparking worries that a global trade war could break out.

Investors are bracing for a key end-of-week in European politics, with British Prime Minister Theresa May expected to make a Brexit speech later Friday. At the weekend, Italians head to the polls in a general election, while a vote by the Social Democratic Party could decide Germany's government.

How markets are trading

On the national indexes, Germany's DAX 30 index sank 2.1% to 11,955.09, and France's CAC 40 fell 1.6% to 5,179.80. The DAX was facing a 3.2% fall for the week.

Italy's FTSE MIB was down 1.2% at 22,050.80, and the U.K.'s FTSE 100 lost 0.7% at 7,129.65.

The Stoxx Europe 600 index suffered a 1.2% drop to 370.29.

Read:Italian election--stocks to buy and avoid ahead of Sunday's vote (http://www.marketwatch.com/story/italian-election-stocks-to-buy-and-avoid-ahead-of-the-march-4-vote-2018-02-23)

(http://www.marketwatch.com/story/european-stocks-struggle-as-hsbc-bhp-billiton-updates-disappoint-2018-02-20)The euro traded at $1.2209, up slightly from $1.2194 late Wednesday in New York.

The yield on the Germany's 5-year bond turned negative, falling 2 basis points to minus 0.12%, as investors sought relative safety in the bond market. Yields fall as prices rise.

What's driving markets

European and Asian stock markets were falling after Trump said late Thursday he will sign orders to impose tariffs of 25% on steel imports and of 10% on aluminum imports (http://www.marketwatch.com/story/trump-today-president-tells-steel-aluminum-executives-theyll-have-protection-as-he-announces-tariffs-2018-03-01) into the U.S.

Trump said the move will provide "protection for a long time" for U.S. steel makers, whose shares rallied (http://www.marketwatch.com/story/steel-stock-investors-taken-on-a-wild-ride-to-gains-by-trumps-tariff-saga-2018-03-01) Thursday. But the broader U.S. equity market slid (http://www.marketwatch.com/story/these-dow-and-sp-500-stocks-took-the-biggest-hits-on-fears-of-a-trump-trade-war-2018-03-01), leaving the Dow Jones Industrial Average down more than 400 points, or 1.7%, while a key gauge of volatility rose about 13%.

"We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk," said European Commission President Jean-Claude Juncker in a statement (http://europa.eu/rapid/press-release_STATEMENT-18-1484_en.htm) late Thursday. "The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures against the U.S. to rebalance the situation."

Read:Why the stock market took Trump's tariff announcement so hard (http://www.marketwatch.com/story/heres-why-the-stock-market-took-the-trump-tariff-announcement-so-hard-2018-03-01)

Trump's announcement came before a key round of political developments throughout the region. On Friday afternoon, U.K. Prime Minister Theresa May will outline her vision for what the U.K.'s post-Brexit relationship will be with the European Union. May on Wednesday rejected the EU's draft version of its Brexit treaty.

Read:How May's speech today could wallop the pound (http://www.marketwatch.com/story/these-3-factors-could-wallop-the-euro-and-pound-2018-03-01)

What strategists are saying

"President Trump sparked concerns of a protectionist trade war with China and the EU by announcing his intention to impose import tariffs on steel and aluminium. This added to concerns of Fed overtightening," said analysts at Accendo Markets in a note. Trump's announcement "took [the U.S. dollar] off its 6-week highs, meaning an unhelpful reciprocal bounce for [the pound and the euro] to dent the FTSE and DAX, while oil prices turned back lower," they said.

"The DAX appears to be leading the declines in European markets this week, with car makers already under pressure as a result of this week's German court decision regarding bans on diesel cars," wrote Michael Hewson, CMC Markets's chief market analyst.

Stock movers

Shares of steel maker Thyssenkrupp AG (TKA.XE) slumped 3.2%, while those of ArcelorMittal SA (MT) sank 4.4%. Steel pipe maker Tenaris AG (TEN.MI) lost 2%, and industrial sector heavyweight Siemens AG (SIE.XE) was lower by 2.9%.

Car makers, users of steel, lost ground too. Volkswagen (VOW.XE) (VOW.XE) fell 2.8%, Daimler AG (DAI.XE) shed 2.5%, and BMW AG (BMW.XE) gave up 2.1%.

Economic data

A reading on construction in the U.K. in February surprised by being healthier than seen. The IHS Markit/CIPS construction purchasing managers' index came in at 51.4, beating a 50.8 consensus estimate from FactSet.

Weekend votes in focus

On Sunday, Germany's center-left Social Democratic Party will announce the result of its vote on whether to join a grand coalition with Chancellor Angela Merkel and her center-right Christian Democratic Union. If the outcome is in favor, it would likely bring an end to five months of uncertainty over the government in Germany.

Also, Italy will hold a general election, in which the left-leaning populist 5 Star Movement has taken the lead in polls, followed by the center-left Democratic Party and the center-right Forza Italia.

Analysts say the outcome of both those events could drive the continent's landscape for politicals and financial markets during the year.

See:What investors need to know about the most important date on Europe's political calendar (http://www.marketwatch.com/story/investors-are-counting-down-to-the-most-important-date-on-europes-political-calendar-2018-02-20)

And check out:Hedge funds' faith in euro dwindles ahead of political 'Super Sunday' (http://www.marketwatch.com/story/hedge-funds-faith-in-euro-dwindles-ahead-of-political-super-sunday-2018-02-26)

"Analysts and German media suggest that most probably SPD members will vote in favor of the coalition. Should that be the case, we could expect the new German government to form as the CDU has already accepted the deal," wrote IronFX senior research analyst Peter Iosif. "Should the forecasts be realized, we could see a strengthening of the euro."

"The Italian national election is up for grabs. Polls say nearly 30% of the electorate is undecided. Several polls show the populist Five Star Movement leading. If they win, that would probably negative for the euro, because they've previously called for Italy to leave the common currency," said Marshall Gittler, chief strategist at ACLS Global, in a note.


(END) Dow Jones Newswires

March 02, 2018 06:15 ET (11:15 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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