Trade war fears hamper European stocks, weak pound buoys FTSE

Credit: REUTERS/RALPH ORLOWSKI

European shares edged lower on Wednesday as concerns over a protracted U.S.-China trade war again worried investors, while a drop in the pound helped London's blue-chip index outperform.

By Medha Singh

May 22 (Reuters) - European shares edged lower on Wednesday as concerns over a protracted U.S.-China trade war again worried investors, while a drop in the pound helped London's blue-chip index outperform.

The pan-European STOXX 600 index .STOXXfell 0.1 by 0800 GMT with Germany's DAX .GDAXI, traditionally sensitive to trade issues, down 0.1% and France's CAC .FCHIslipping 0.2%.

A report that the United States is considering curbs on Chinese video surveillance firm Hikvision 002415.SZ added to the list of tensions between the two sides ahead of a summit later this month.

That ran counter to signs of a temporary relaxing of Washington's moves against Chinese phone and net gear maker Huawei Technologies HWT.UL on Tuesday, ostensibly in aid of keeping U.S. firms' supply chains working in the near-term.

"Sentiment remains fragile as investors digest the changing face of the trade dispute from broad sweeping tariffs to direct action against single Chinese companies," Jasper Lawler, head of research at futures brokerage London Capital Group, wrote in a note.

The STOXX 600 is down about 3.1% so far this month, on course for its first monthly decline this year as the tensions threaten to hurt global growth.

Auto shares .SXAP slipped 0.4% and basic-resources stocks .SXPP, among those first in the firing line, retreated 0.3%.

The bank .SX7P stocks index slipped 0.7%, taking a hit from lower euro zone bond yields as investors piled into the traditional security of government bonds.

Britain's exporter-heavy FTSE 100 .FTSE outperformed its peers and rose 0.4%, bolstered by Brexit-driven falls in the pound, which boost the foreign revenues of its internationally-focused firms.

Prime Minister Theresa May's final Brexit was in a shambles on Wednesday just hours after her offer of a vote on a second referendum and closer trading arrangements failed to win over British lawmakers.

Marks & Spencer MKS.L shares dropped about 5% after the retailer reported its third straight decline in full-year profit, showing the pain of its latest attempt at a multi-year turnaround.

IG Group Holdings Plc IGG.L jumped to the top of the STOXX 600 after the company unveiled a plan to drive growth even as it was the latest online financial trading platform to forecast a sharp fall in full-year net trading revenue and operating profit.

The defensive healthcare sector .SXDP, popular in times of economic or political strife, was the biggest sectoral gainer.

(Reporting by Medha Singh and Agamoni Ghosh in Bengaluru; editing by Patrick Graham and William Maclean)

((Medha.Singh@thomsonreuters.com; within U.S. +1646 223 8780, outside U.S. +91 80 6749 1130; Twitter: https://twitter.com/medhasinghs; Reuters Messaging: medha.singh.thomsonreuters.com@reuters.net))

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