Markets

European markets close lower on German politics and trade concerns

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Key Points
  • Unemployment numbers in the euro area fell in May putting the jobless rate at 8.4 percent across the 19 countries.
  • Euro area PMIs fell to a 18-month low in June on concerns over growing trade barriers.
  • Investors are still waiting to see if German leader Angela Merkel can fix a domestic dispute on immigration.

Shares in Europe traded lower Monday as investors questioned the stability of the German government and wider trade links between the European Union and the U.S.

The pan-European Stoxx 600 provisionally ended 0.76 percent lower with every sector in the red. The German Dax started the day leading the falls across the major European bourses, but finished Monday off by 0.49 percent. In terms of sectors, Basic Resources was the worst performer, down by 2.2 percent. Industrials, Construction, and Travel & Leisure were other big losers.

Market players are waiting to hear if the German interior minister has resolved differences with Chancellor Angela Merkel on migration. Horst Seehofer, also leader of the sister party of Merkel’s CDU (Christian Democratic Union), is a key player in the current German government and his potential withdrawal could jeopardize Merkel’s future as chancellor.

As a reflection of the nervousness, German 10-year bond yields dipped to five-week lows. Price moves inversely to yield in the fixed income market.

Meanwhile, the European Union has threatened to impose new retaliatory tariffs worth $300 billion if the U.S. moves forward with penalties on European cars, the Financial Times reported. Furthermore, the White House has prepared a draft bill that allows it to unilaterally increase tariffs without the approval of Congress, Axios reported.

Corporate news

Playtech closed at the bottom of the European benchmark, down by more than 26 percent, due to a profit warning. The Isle of Man-based firm writes software for gambling machines.

Micro Focus was among the top gainers Monday, up 1.51 percent for the session. This followed news that the company has agreed to sell its Linux operating system SUSE to a private equity fund.

In other news, Tesco and Carrefour are set to use their market strength to ensure better deals from suppliers and thus fight domestic competition. The two supermarket giants announced a new long-term partnership on Monday.

U.K. aerospace firm Meggit is trading higher after company raised its outlook for sales but trimmed its profit margin forecast. Shares in the firm rose 6.2 percent, making it the Euro Stoxx 600's top gainer.

Airbus shares shares fell 2.54 percent on Monday after it was reported by Bloomberg that the European planemaker is set to miss its 2018 delivery target.

The report claimed that problems with the Pratt & Whitney powered A320neo jets would see a shortfall of as many as 40 aircraft from the company's official forecast.

Investors also monitored new data releases. Unemployment numbers in the euro area fell in May putting the jobless rate at 8.4 percent across the 19 countries. Separately, the IHS Markit manufacturing purchasing managers' index fell to a 18-month low in June on concerns over growing trade barriers.