European stocks close lower amid trade concerns, emerging market turbulence

Key Points
  • Global trade fears and emerging market turbulence weighed on investor sentiment.
  • Sweden's Riksbank kept rates unchanged but said the repo rate could hike in December or February.
  • Brexit concerns remained after Germany said it was ready for all scenarios, including a no-deal.

Stocks in Europe closed lower Thursday on the back of ongoing concerns over potential new U.S. tariffs on China and a sell-off in emerging markets.

The pan-European Stoxx 600 extended losses to hit a session low, closing provisionally down 0.59 percent. Basic resources stocks led Europe lower, down 1.75 percent, as traders continued to worry over the possibility of a trade war between two of the world's largest economies. Mining firm BHP Billiton and copper producer Aurubis were the worst sectoral performers, both down around 5 percent.

Tech was also one of the worst-performing sectors, due to political scrutiny of the industry stateside. French engineering consultant Altran was the top sectoral loser, after reporting a first-half free cash flow loss of 225 million euros ($262 million), much larger than the 14 million euro loss it reportedly last year. Shares were down 8.07 percent.

Looking at individual stocks, British engineering firm Weir Group was the worst performer in Europe, tumbling 8.623 percent after reporting a weakening in demand for original equipment. French aircraft engine manufacturer Safran led the gains, up by 6.37 percent after reporting solid first-half earnings.

Shares of energy providers were also higher. This followed news that the U.K.'s energy regulator, Ofgem, has set the level of a proposed price cap, which is expected to save about $1.29 billion to consumers. Centrica was among the top gainers across Europe, up by 4.986 percent.

In the corporate world, Commerzbank will be replaced in the DAX by payments firm Wirecard from September 24 onwards. Meanwhile, U.K. housebuilder Bovis Homes said that full-year profits will come at the top end of expectations.

Trade war, emerging market downturn

On Wall Street, equities were little changed as tech stocks tried to recover from a steep sell-off in the previous session. C-level executives from social media giants Twitter and Facebook testified before Congress on Wednesday, with shares of both falling on the back of regulatory concerns.

Traders also kept a close eye on the latest global trade developments, worried that the U.S. and China could slump further toward an all-out trade war. Washington could impose yet another round of tariffs on Beijing, targeting an additional $200 billion worth of Chinese goods, as a public comment period on the matter comes to an end Thursday.

Overall, investors are questioning the future of certain emerging markets, including Argentina. Officials in Buenos Aires said Wednesday that they are confident about a new deal with the International Monetary Fund (IMF). The country shocked market players last week after it asked the IMF for the early unlocking of funds from a $50 billion financing deal, adding to worries over whether it will meet its debt obligations.

The MSCI emerging markets index, which tracks the markets of 24 countries, fell 1.77 percent.

Back in Europe, Brexit remains a concern, following comments from the German government that it is ready for all scenarios, including a no-deal. Sterling briefly skyrocketed in the previous session following a report that the U.K. and Germany dropped key Brexit demands, lifting the prospect a deal being reached in Brussels. Meanwhile, the FT has reported that the U.K. will test a new scheme to hire non-EU agricultural workers to ensure that British farmers will not face problems after Brexit.

On the data front, markets digested news from the Swedish central bank. The Riksbank kept rates unchanged but said that the repo rate could go up in December or February.