Europe: Stocks close week lower on Trump’s EU, Apple tariff threats

European shares closed sharply lower on Friday (May 23) after US President Donald Trump ramped up threats of tariffs on the European Union and smartphone giant Apple, reigniting fears of a damaging global trade war.

Trump said he is recommending a straight 50 per cent tariff on goods from the EU starting on Jun 1, which would result in stiff levies on luxury items, pharmaceuticals and other goods. He also threatened Apple with a 25 per cent tariff on any iPhones sold, but not manufactured, in the United States.

“This latest move threatens a full-scale escalation of the global trade war. European markets will suffer, undoing some of the strong momentum we have seen in recent months,” Lindsay James, investment strategist at Quilter, said.

“What happens next is anyone’s guess, but it is unlikely the EU simply rolls over following this latest development.”

The pan-European Stoxx 600 index closed 0.9 per cent lower, and marked a weekly decline, its first in six. The index logged its biggest one-day fall since Apr 9.

A gauge of euro zone stocks took a sharper 1.5 per cent hit, with declines on London’s FTSE 100 contained, as the country clinched a trade deal with the US earlier this month.

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The Euro Stoxx Volatility index spiked to its highest in more than three weeks.

The Stoxx 600 had recovered from its early April slump after trade deals between the US and some trading partners had calmed worries over trade tensions.

On Friday, automobiles and parts, expected to take the biggest hit from tariffs, led broader declines with a 3.1 per cent fall. Economically-sensitive banks shed 1.8 per cent, while an index of luxury goods dropped 2.7 per cent as they are highly exposed to the US market.

Germany’s DAX fell 1.5 per cent after coming within spitting distance of a record high earlier in the day when data had shown that the country’s economy grew significantly more in the first quarter than previously estimated.

Indexes in France, Spain and Italy, were down more than 1 per cent each.

The benchmark 10-year European government bond yield dropped along with its US counterpart on raised concerns about slowing economic growth.

Traders bet on more interest rate cuts from the European Central Bank, expecting the deposit rate to reach 1.60 per cent by December from 1.72 per cent before Trump’s comments.

British investment platform AJ Bell jumped 8.4 per cent after it posted a 12 per cent year-over-year rise in half-yearly profit before tax, benefiting from increased client activity. REUTERS