Europe midday: Trade tensions, Poland election result hit sentiment

(Sharecast News) - European shares were lower on Monday as trade war tensions increased between China and the US while Polish shares were hit by the election of right-wing populist Karol Nawrocki as president.

The pan-regional Stoxx 600 was down 0.40% at 546, with Germany's DAX 0.59% lower. Poland's WIG index slumped 1.59% on fears that the nationalist Nawrocki would hinder the pro-Europe government of Donald Tusk.

Britain's energy-heavy FTSE 100 bucked the trend with a small gain as oil prices rose while weapons makers were boosted on the back of the government's defence spending review.

Asian shares were sharply lower as Beijing accused the US of "seriously violating" the trade truce which the two powers agreed in Zurich last month after US President Donald Trump made the claim in reverse over the weekend without any supporting evidence.

China's commerce ministry said it would take forceful measures to safeguard its interests and rejected Trump's claim.

"The U.S. government has unilaterally and repeatedly provoked new economic and trade frictions, exacerbating uncertainty and instability in bilateral economic and trade relations," the ministry said in a statement.

Beijing accused Washington of unilaterally introducing new discriminatory restrictions, including new guidelines on AI chip export controls, curbs on chip design software sales to China and the revocation of Chinese student visas.

"The tit-for-tat narrative has sharpened, and with both sides digging in, the political tone is growing more adversarial by the hour. This isn't just diplomatic shadowboxing anymore-it's bleeding into market sentiment," said SPI Asset Management partner Stephen Innes.

"In the absence of clarity, risk aversion remains the default trade in Asia. Equities are sliding, and capital is shifting to more defensive postures. Markets aren't pricing in a clean resolution anytime soon-and that's a message worth heeding.

In equity news, Polish banks were down on the election of right-wing populist opposition candidate Karol Nawrocki as president, defeating the pro-European RafaB Trzaskowski. Bank Polska Kasa Opieki, Powszechna Kasa Oszczednosci Bank, and Santander Polska all fell between 3.5 and 5%.

German packaging and medical equipment maker Gerresheimer slumped by almost a fifth as the company cut full year guidance, citing weak demand.

Shares in UK and European weapons jumped on Monday as the British government launched a review as part of its plans to hike defence spending in response to rising threats from Russia.

Dassault, Babcock, BAE Systems, Thales, Saab, Leonardo, Rheinmetall and Qinetiq were all up on the news.

Reporting by Frank Prenesti for Sharecast.com