Europe open: Stocks reel amid global trade tensions, poor Chinese data

Stocks on the Continent are falling sharply following an unexpected move by the US administration to slap tariffs on Mexico, even amid signs that China will ramp up its response to pressure from Washington and following a weak reading on activity in China's manufacturing sector.

On Thursday evening, Donald Trump said the US would impose a 5% tariff on all goods from Mexico in response to a "surge" in immigration, just as the two countries were expected to reach an agreement on a new trade pact.

Some analysts were critical of the move, describing it as a proverbial 'bolt out of the blue'.

In reaction, as of 1022 BST, the benchmark Stoxx 600 was trading lower by 1.19% to 367.66, alongside a fall of 1.37% to 5,177.01 for the Cac-40, while the Dax was off by 1.73% to 11,698.15.

Shares in autos and parts companies were especially weak, with the Stoxx 600 sector gauge down by 2.83%, alongside sharp falls for Basic Resources (-2.18%) companies, and Banks (-1.91%).

Brent oil futures were caught in the sell-off, dropping by 3.1% to $64.87 a barrel on the ICE.

Investors were also mulling more warnings in Chinese state media that Beijing would retaliate against America's decision to blacklist telecoms equipment maker Huawei.

Writing on his Twitter account, the editor of Chinese tabloid The Global Times, which is run by that country's Communist Party's People's Daily, Hu Xijin, said: "Based on what I know, China will take major retaliative measures against the U.S. placing Huawei and other Chinese companies on Entity List."

Adding to the glum mood in markets, on Friday morning a closely-followed survey of activity in China's factory sector had surprised to the downside as new export orders dropped sharply.

Rounding out a poor morning for European stock markets, the Federal Office of Statistics reported that German retail sales volumes dropped at a month-on-month pace of 2.0% in April (consensus: +0.1%).

And in Italy, ISTAT said that on a harmonised basis he year-on-year rate of gains in consumer price had slowed from 1.1% for April to 0.9% in May (consensus: 1.0%).