Europe open: Stocks trip on North Korea warning, French elections in focus

Investors steady diet of French election polls for the Easter-shortened trading week was supplemented on Tuesday with a dose of tension on the Korean peninsula, even as US Secretary of State Rex Tillerson was due to meet his Russian counterpart in Moscow to discuss the situation in Syria.

As of 0836 GMT the benchmark Stoxx 600 was off 0.10% to 380.85, as the Dax slipped 0.22% to trade at 12,173.56 while the Cac was 0.13% lower to 5,010.02.

Euro/dollar was holding slightly lower, drifting down by 0.06% to 1.0589.

Key to the early market moves, overnight North Korea, whose government is holding its twice-yearly Supreme People´s Congress on Tuesday, warned it will respond to any acts of aggression by the US.

The country's "self-defensive and pre-emptive strike capabilities with nuclear force at their core" were justified by the current grim situation, officials from Pyongyang said in a statement provided to CNN.

North Korea thus warned it will respond to "reckless acts of aggression" by America with "whatever methods the US wants to take", after US navy ships were redirected towards its waters.

Commenting on the situation in markets, FXTM Chief Market Strategist Hussein Sayed said: "Investors are dumping risk assets early Tuesday as geopolitical tensions remained the key catalyst shaking the markets. The move by China to send 150,000 troops to North Korea border over fears that Trump may strike Pyongyang and comments from White House Press Secretary Sean Spicer that additional U.S. intervention could be triggered are putting investors on the defensive side."

"Watching French presidential election polls is the only game in town for the shortened pre-Easter week. [...] According to the Bloomberg composite of French election polls, which covers the average of poll data from five different sources, the gap between Mr. Mélenchon and Mr. Macron has shrunk to 5pp from 14pp within a time span of little more than two weeks. Within the same period, Ms. Le Pen’s lead over Mr. Mélenchon has fallen to 6pp from 16pp," fixed income analysts at UniCredit Research chipped in.

On Monday, the VSTOXX index of volatility for European stocks jumped by more than 13% to 22.09, its highest level since 2 December, analysts at Deutsche Bank noted.

On the economic calendar for Tuesday is the ZEW institute's economic confidence gauge for Germany in April at 0900 GMT, followed by euro area industrial production referencing the month of February one hour later.

The Italian government was also scheduled to publish updated growth and public debt forecasts for 2017.

Meantime, and on the corporate side of things, analysts at Berenberg reiterated a 'Sell' recommendation on shares of Spanish lender Bankia.

"Having re-rated materially on expectations of rising interest rates, 50-60% EPS upgrades may be required to justify Bankia’s current share price. We believe expectations have run too far. [...] We see little reason to change our EPS forecasts and thus remain high-convictions sellers," they said in a reserch note sent to clients," Berenberg said.

Germany's Lufthansa was set to release traffic data for March at 1100 GMT.