LONDON (Reuters) - European shares climbed on Wednesday but the modest rebound failed to erase the previous session’s losses as investors’ fears about an ongoing trade dispute between the United States and China lingered.
The pan-European STOXX 600 edged up 0.3 percent, while Germany's trade-sensitive DAX .GDAXI managed only a 0.1 percent gain.
The growing Sino-U.S. trade conflict has already hit markets and with both protagonists showing no signs of willingness to back down, many analysts fear the worst is yet to come for markets.
“It’s fair to say they have a long way further to fall if a compromise isn’t found,” said Deutsche Bank strategist Jim Reid, adding “markets are starting to move toward pricing in this not being a short-term spat”.
Niggling trade worries were evident in a fourth straight day of losses for the auto sector .SXAP, down 0.6 percent, and further falls in Airbus (AIR.PA) shares which have been sensitive to the China-U.S. tariff tit-for-tat.
Banking stocks supported the market, with Spain’s Banco Santander (SAN.MC) and Italy’s Unicredit (CRDI.MI) rising 1.4 percent and 2.8 percent respectively after the Franco-German agreement to further the integration of the Euro zone.
Italian bank Banco BPM (BAMI.MI) sold non-performing loans (NPLs) at a higher than expected price, also boosting sentiment around the banking sector particularly in the context of political uncertainty in Italy.
Italy’s bank stocks index .FTIT8300 jumped 2.2 percent in its best day since June 11.
“(The transaction’s) completion at this price level should somewhat alleviate market concerns that the recent improvement in the NPL market might reverse as a result of the country’s government changes and higher sovereign spreads,” said Goldman Sachs analysts.
Healthcare stocks .SXDP were the biggest boost to the index.
Roche (ROG.S) was the main driver, rising 2.6 percent after a report said the Swiss pharma firm could soon announce an acquisition of U.S. cancer drugmaker Tesaro.
French advertising company JCDecaux (JCDX.PA) jumped 7.6 percent after submitting a non-binding offer for Australia’s APN Outdoor Group APO.AX.
Berkeley (BKGH.L) was the biggest faller, down 4 percent after the British housebuilder warned of a 30 percent fall in pre-tax profit this year after delivering a better-than-expected “peak” performance in 2017/18.
French cognac maker Remy Cointreau (RCOP.PA) fell 4.2 percent after Société Generale analysts downgraded the stock, arguing that “too much good news” had already been priced in. Fellow spirits maker Pernod Ricard (PERP.PA) also slid 0.7 percent.
Salvatore Ferragamo (SFER.MI) weighed on Italy’s FTSE MIB, falling 8.4 percent after the luxury group’s controlling family sold shares at a steep discount, triggering concern over the firm’s profitability.
The stock's losses dented sentiment across the luxury sector. Gucci owner Kering (PRTP.PA), Hermes (HRMS.PA) and LVMH (LVMH.PA) fell 1 to 2.5 percent, driving France's leading CAC 40 .FCHI index to underperform the market with a 0.3 percent decline.
These multinational luxury conglomerates, as well as spirits firms, have suffered sharp falls as a result of concerns about rising trade barriers.
Danish medical equipment supplier Ambu (AMBUb.CO) topped the STOXX with a 9.2 percent rise. The stock entered Nasdaq’s Copenhagen 25 index on Monday, and moves around promotion can often be volatile.
Reporting by Julien Ponthus and Helen Reid; Editing by Raissa Kasolowsky, Jon Boyle and Alexandra Hudson