German stocks led a selloff Friday in European markets, with major bourses under pressure as trade tensions between the U.S. and other countries look set to be on full display when leaders of the Group of Seven advanced economies gather in Quebec.
From the corporate front, shares of Deutsche Bank AG and Commerzbank AG fell following a report that Deutsche Bank is exploring a potential merger with its German rival.
How markets are performing
Germany’s DAX 30 index
dropped 1.1% to 12,667.39, and France’s CAC 40 index
fell 0.4% to 5,426.00.
Italy’s FTSE MIB index
slid 1.7% to 21,405.26, and Spain’s IBEX 35
gave up 0.9% to 9,741.80. The U.K.’s FTSE 100
suffered a loss of 0.8% at 7,645.72.
Overall, the Stoxx Europe 600 Index
slumped 0.5% to 383.94. It was on track for 0.8% weekly decline and that would mark a third straight weekly loss.
bought $1.1768, down from $1.1800 late Thursday in New York. But the shared currency was looking at a roughly 1.6% rise this week, finding support after ECB officials indicated policy makers at their June 14 meeting will discuss when to end the central bank’s quantitative-easing program.
What’s driving markets
European stocks slumped as investors saw a flare-up in tensions between U.S. President Donald Trump and American allies Canada and France before the G-7 summit gets under way in Charlevoix, Quebec, on Friday.
Fears of a global trade war have been running on-and-off through financial markets since March when Trump said he’d would protect U.S. steelmakers by slapping tariffs on aluminum and steel imported into the U.S. Those levies have since been implemented against the European Union as well as against countries such as China.
“The six countries of the G-7 without the United States are a bigger market taken together than the American market. There will be no world hegemony if we know how to organize ourselves. And we don’t want there to be one,” French President Emmanuel Macron said Thursday in Ottawa, flanked by Canadian Prime Minister Justin Trudeau. Macron added to those remarks in a tweet.
Trump responded to Macron then followed up with other tweets that took aim at Canada and the European Union:
Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!
— Donald J. Trump (@realDonaldTrump) June 8, 2018
What strategists are saying
“Up to now the markets were sanguine regarding increasing global trade tensions, as traders assumed Trump’s aggressive stance is just another wild negotiating tactic. It’s already clear that no one wants to play ball with Trump, with those involved already promising tit-for-tat retaliation,” said Jasper Lawler, head of research at London Capital Group, in a Friday note.
“However, the problem we envisage here is that the collective group of leaders could use this as an opportunity to make their point clearer, turning the event into a reason to take risk off the table. Uncertainty as to how these talks will pan out is unnerving investors sending them out of riskier assets such as stocks, and into traditional havens such as treasuries and the yen,” he said.
The France, Germany, Italy, the U.K., Canada, Japan and the U.S. are the G-7’s members and their summit runs through Saturday.
shares lost 1.3%, and Commerzbank
slumped 2% following a Bloomberg report that Deutsche Bank’s Chairman Paul Achleitner is considering a merger with Commerzbank, and has been speaking with top investors and government officials about a potential deal.
Standard Life Aberdeen PLC
sank 3.9% after Lloyds Banking Group PLC sold its remaining 3.3% stake in the investment company for £344 million ($461.6 million). Lloyds shares
BT Group PLC
was up 0.4% after the U.K. telecommunications group said Chief Executive Gavin Patterson will step down later this year after five years in the role. BT said it’s started a search for his successor.