By Jon Sindreu 

Global stocks headed lower Monday, as investors continued to parse the impact of a trade spat between the U.S. and China.

The Stoxx Europe 600 fell 1.1% in the European morning, with the trade-heavy German Dax down 1.4%. The automobile sector, which analysts see as particularly exposed to trade, led the losses and fell 2%.

U.S. futures pointed to a 0.7% opening loss for the S&P 500.

In Asia, Hong Kong's Hang Seng and the Shanghai Composite shed 1.1% and 1.3%, respectively. Japan's Nikkei Stock Average closed down 0.8%.

Investors around the globe have been spooked by the prospect of a full-blown trade war between the U.S. and China. While the tariffs so far announced by the U.S. administration -- and China's retaliatory measures -- amount only to a small amount of goods, analysts fear that tensions could escalate and spread across other major economies.

President Donald Trump now also plans to bar many Chinese companies from investing in U.S. technology firms.

Shares of car makers have been rattled by trade concerns: They are down 0.9% and 7.2% on the month in the U.S. and Europe, respectively, compared with a 1.8% rise for the S&P 500 and a 0.6% fall for the Stoxx Europe 600.

Trevor Greetham, multiasset head at Royal London Asset Management -- a firm with around GBP114 billion ($151 billion) under management -- has reduced his fund's bias toward stocks to its lowest in six years, but remains positive on U.S. shares.

"It's more likely the trade issue impacts emerging markets than it does the U.S., because the U.S. is a relatively closed economy," he said.

In Europe and emerging markets such as China, recent economic data has pointed to weaker growth than earlier in 2018, further dampening investor sentiment. On Monday, the monthly Ifo Business Climate Index suggested German business sentiment deteriorated further in June.

"We've moved away from the synchronous global expansion," said Bob Baur, chief global economist at Principal Global Investors, who believes global growth peaked around February of this year, but that "the U.S. is still gaining momentum."

Some central banks are already moving to act as a cushion, investors said.

On Sunday, the People's Bank of China said it would cut the amount of reserves banks are required to keep with the central bank, a move that can help lower borrowing costs -- even though it's often associated with the need to free up liquidity to prop up the currency.

The European Central Bank said two weeks ago that, even as bond purchases are set to stop in December, interest rates in the eurozone will remain unchanged at least until summer of next year.

"We are getting to see signs of central banks outside the U.S. turning a bit easier, and that should help stock markets perk up later in the year, " added Mr. Greetham, who has been buying back some bonds to account for easier central-bank policy.

After strong gains in the yuan against the dollar earlier this year, the U.S. currency has now made up all the lost ground. The WSJ Dollar Index, which tracks the dollar against a basket of currencies, was up 0.1% Monday, and 10-year Treasury yields edged down to 2.877% after closing at 2.902% last week.

Meanwhile, the Turkish lira dropped 0.8% on the day against the U.S. dollar, after incumbent President Recep Tayyip Erdogan's victory in Sunday's presidential and parliamentary elections,

Investors had initially focused on the "elimination of the worst-case scenario of a hung parliament," wrote Morten Lund, an analyst at Nordea Bank AB. Yet, the Turkish currency has been under pressure in recent months due in part to Mr. Erdogan's policies -- chiefly, the perceived lack of independence of the central bank.

In commodities markets, oil prices retraced some of Friday's gains, obtained after major oil producers agreed to only modest increases in production. Brent, the global benchmark, was down 1.7% to $74.06 a barrel Monday.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

June 25, 2018 08:48 ET (12:48 GMT)

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