Europe midday: Stocks fall sharply as tariff fears mount, data disappoints

(Sharecast News) - Stocks across Europe were trading firmly in the red on Friday as concerns about new potential US trade tariffs weighed heavily on sentiment.

Donald Trump said on Thursday that letters imposing unilateral tariffs will start to be sent out to 10 or 12 US trading partners, with duties ranging between 10% and 70%.

Ahead of the 9 July deadline, Trump said: "We're probably going to be sending some letters out, starting probably tomorrow, maybe 10 a day to various countries saying what they're going to pay to do business with the US."

The Stoxx 600 was down 0.8% at 539.29, on track to finish at its lowest since 26 June, with heavy falls in Paris (-1.0%), Milan (-0.9%) and Madrid (-1.7%).

The negative open comes despite a record close for the S&P 500 and Nasdaq on Wall Street overnight, after non-farm payrolls data came in well ahead of forecasts - despite the strong data prompting economists to scale back their Federal Reserve rate cut expectations. US markets will be closed on Friday for the Fourth of July national holiday.

"President Trump seems to have called time on trade negotiations before next Wednesday's deadline [...] The President said that a 'couple' of deals could be announced, but that his 'inclination' is to send letters out. This suggests that at this late stage he is willing to play hardball rather than negotiate," said Kathleen Brooks, research director at XTB.

"We expect a deal with India to be announced before the 9th July deadline, but it seems unlikely that Japan will get a deal, and the silence around an EU deal is also weighing on investor sentiment."

Economic data disappoints

A raft of economic news from the eurozone came in under expectations on Friday.

The eurozone producer price index fell by 0.6% in May, slowing significantly after a 2.2% drop in April - its strongest decline in two years - but more than the -0.5% consensus forecast. The annual rate of inflation of factory gate inflation slowed from 0.7% to 0.3%, its lowest in five months.

The HCOB construction purchasing managers' index fell to 45.2 in June from 45.6 in May, signalling a steeper contraction in overall output. This was led by accelerated declines in both residential and commercial building, with housing remaining the worst-performing segment.

Meanwhile, German factory orders slumped 1.4% in May following a revised 1.6% increase in April. This was the first decline since January and well below the 0.1% fall expected by analysts.

Market movers

Mining stocks in London were among the worst performers of the morning, including Anglo American, Antofagasta and Glencore as LME three-month copper prices fell 1% to $9,854 a metric ton. Prices surged to almost the $10,000 mark on Thursday - their highest this year - as traders rushed to beat ahead of the potential imposition of new US tariffs.

Air France-KLM rose on the bak of plans to raise its interest in Danish airline SAS from 19.9% to 60.5% for an undisclosed amount.

Alstom was also higher in Paris after the trainmaker reported a �2bn railcar order from the New York Metropolitan Transportation Authority.