Markets

European stocks close lower after US says it will impose steel and aluminum tariffs on EU

Key Points
  • The U.S. said it would impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico.
  • Europe's bank stocks were among the worst performers on Thursday, dragged down by Deutsche Bank.
  • Euro zone inflation rate jumped to 1.9 percent in May from 1.2 percent in the previous month.

European stocks closed lower Thursday, after the U.S. said it would impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico.

The pan-European Stoxx 600 shed gains from earlier in the session, closing provisionally down 0.63 percent, with most sectors in negative territory and major bourses mixed.

Germany's 30-stock DAX index was among the worst performing bourses in Europe, down 1.4 percent, amid growing fears of protectionism from the U.S. German magazine WirtschaftsWoche reported Thursday that President Donald Trump hopes to block the country's luxury carmakers from the U.S. market. Autos stocks fell on the news, with Porsche and Groupe PSA both dropping over 2 percent.

Spain's IBEX 35 index, meanwhile, was 1 percent lower, ahead of a no-confidence vote on Prime Minister Mariano Rajoy's leadership. If successful, the vote would topple the incumbent government and allow Spanish Socialist Workers' Party leader Pedro Sanchez to take the reins.

Europe's bank stocks were among the worst performers on Thursday, dragged down by Deutsche Bank. The German bank slumped to the bottom of the European benchmark after the Wall Street Journal reported that its U.S. business was designated by the Federal Reserve as being in "troubled condition." Shares were down by almost 7 percent.

Meanwhile, Irish building materials group CRH said Thursday that it would streamline some of its European and American businesses by merging them in an effort to boost profit margins. The company's stock was among the top performers in Europe, up 3.67 percent.

Tariffs

Focus turned away from Italy after U.S. Commerce Secretary Wilbur Ross said the U.S. would impose levies of 25 percent on steel imports and 10 percent on aluminum imports from the EU, Canada and Mexico. Condemnation poured in from U.S. allies, with the EU and Mexico saying they would introduce countermeasures.

On Sunday, Italy's euroskeptic populist parties abandoned plans to form a coalition government. That effectively raised the likelihood of a new general election and stoked fears such a vote could be framed as a de facto referendum on the country's euro membership.

However, alongside fresh coalition talks, the successful sale of five-year and 10-year government bonds Wednesday also alleviated worries about Italy's ability to finance itself.

On the data front, the euro zone inflation rate jumped to 1.9 percent in May from 1.2 percent the previous month, according to data from European Union statistics office Eurostat released Thursday. The latest figure will likely provide confidence to the European Central Bank, whose target for inflation is below or close to 2 percent.