European Shares Struggle as Trade Fears Weigh on Sentiment

European shares struggled on Monday as fears of the escalating US-China trade conflict outweighed the boost to sentiment from Chinese authorities’ intervention last week to shore up its currency.

Disappointing corporate earnings in the European banking sector added to the cautious start to the week’s trading, Reuters reported.

Chinese state media launched an unusually personal attack against US President Donald Trump’s trade policies on Monday, saying Trump’s trade “extortion” would not work.

It also sought to reassure investors about Chinese economic strength as the months-long dispute rattles financial markets and raises deepening worries about the impact on the real economy.

After an initial rise, Asian shares earlier succumbed to selling pressure, with Chinese shares sliding into negative territory.

European shares were also mixed. The pan-European share index dropped 0.06% while Germany’s DAX fell 0.34% and France’s CAC 40 was virtually flat, down 0.02%.

The biggest plunge in German industrial orders in nearly 18-months added to pressure on German stocks.

The weakness in European shares followed a more than 1% drop in the Chinese blue-chip index and Shanghai’s SSE Composite Japan’s Nikkei and South Korea’s Kospi index also dropped.

The MSCI world equity index, which tracks shares in 47 countries edged down 0.08%.

In offshore markets, the Chinese currency fell 0.1% against the dollar to 6.8562 on Monday, but was well away from the 6.91 weak point the yuan had plumbed last week.

The yuan has been one of the main casualties from the trade conflict, with many investors speculating that the PBOC was happy for the renminbi to weaken to counter the impact of US tariffs.

Traders saw the PBOC effort as an attempt by Chinese authorities to show they wanted stability, and some interpreted it as a conciliatory move to nudge the Americans towards the negotiating table.

Others said the intervention would not stop further yuan weakness with Washington and Beijing at loggerheads over tariffs.

The dollar index, which has benefited as investors rush to safety, rose 0.2% to 95.291, close to a 2-1/2 week high.