HSBC HSBC Holdings PLC

By Steve Goldstein, MarketWatch

Europe stocks dropped sharply on Monday on concerns about being caught up in escalating U.S.-China trade tensions.

The Stoxx Europe 600 index skidded 1.93% to 370.86, with pharmaceuticals, banks and oil producers leading the decline.

The U.K. FTSE 100 index tumbled 1.96% to 7262.24, the German DAX tumbled 1.7% to 11670.57 and the French CAC 40 skidded 2.04% to 5249.52.

What's moving markets

Asian stocks were hit hard as the dollar rose about the key 7 level vs. the Chinese yuan, and as protests continued in Hong Kong. Markets still are reacting to the news that the U.S. plans to impose 10% tariffs on $300 billion of Chinese goods, which unlike past tariff rounds would focus on consumer products. China has said it would retaliate.

"German manufacturing continues to weaken. Driven by China weakness and autos, a swift turnaround seems unlikely. This is Europe's weak spot," said Ruben Segura-Cayuela, an economist at Bank of America Merrill Lynch.

The yield on the key 10-year Treasury dropped as traders priced in the possibility of more Fed rate cuts. "The fact that the Fed bases its interest rate policy on US-China trade tensions rather than the economic data raises the suspicion that Donald Trump may be adding fuel to the flames on the Chinese side to increase pressure for lower rates," said Ipek Ozkardsekaya, senior market analyst at London Capital Group. U.S. stock futures pointed to a sizeable decline at the open.

Focus stocks

HSBC Holdings shares (HSBA.LN) (HSBA.LN) dropped 2.1% after ousting its chief executive (http://www.marketwatch.com/story/hsbc-ceo-john-flint-ousted-after-just-18-months-2019-08-04), John Flint, and announcing a rise in second-quarter profit. The bank also announced it's going to cut thousands of jobs (http://www.marketwatch.com/story/hsbc-to-cut-thousands-of-jobs-after-ceo-ouster-2019-08-05).

Airlines continued to benefit from lower jet fuel prices as crude-oil futures get pressured. International Consolidated Airlines (IAG.LN) shares rose 1% and Lufthansa (LHA.XE) added 0.7%.

Scout24 (G24.XE) shares edged up 0.5% as the activist investor Elliot (http://www.marketwatch.com/story/elliott-advisors-pressures-scout24-2019-08-05)t pushed the German classifieds firm to sell its car listings business and ramp up a share buyback.

(END) Dow Jones Newswires

August 05, 2019 05:07 ET (09:07 GMT)

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