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UPDATE 1-European stocks fall as Huawei ban stokes trade anxiety

Medha Singh

* Nestle at record high on talks to sell skin health unit

* Thyssenkrupp rises on report Kone eyeing bid for elevator unit

* Ubisoft tumbles after disappointing forecast

* Norsk Hydro jumps after Brazil lifts production embargo (Adds details, quote; Updates prices)

May 16 (Reuters) - European shares fell on Thursday after the United States moved to blacklist Chinese telecoms company Huawei, heightening U.S.-China trade tension.

The STOXX 600 index dropped 0.1% by 0900 GMT. Germany's DAX, which is sensitive to tariff and China-related news, lost 1%.

The U.S. Commerce Department said it was banning Huawei Technologies Co Ltd and 70 affiliates from acquiring components and technology from U.S. companies without government approval.

"The conflicting signals over trade are likely to simply spark more uncertainty and confusion in the market, and investors will continue to scatter and reassess their appetite towards taking on risk as a result," said Lukman Otunuga, a research analyst at FXTM.

Auto makers led the losses, giving up gains from Wednesday, when Reuters reported that U.S. President Donald Trump planned to delay tariffs on imported cars and .

Luxury stocks, which have been under pressure from the trade conflict, fell again.

Britain's Burberry lost 3.9% after reporting a 6% drop in adjusted operating profit for the fiscal year . Paris-listed LVMH, Hermes and Kering fell 0.6% to 1%. Italy's Moncler dropped 1.6%.

Ubisoft's shares lost 10% after the French video games group's fourth-quarter results missed market forecasts .

Britain's CYBG Plc, owner of Clydesdale and Yorkshire Bank, dropped about 5%, a day after its results showed it swung to a profit in the first half of the year.

Thyssenkrupp rose 4.5% after Reuters reported that Finland's Kone might bid for the 14 billion-euro ($15.7 billion) Thyssenkrupp elevator division. Kone shares advanced 3.3%.

Nestle SA shares reached a record high after reporting it had entered exclusive talks to sell its skin health business to a consortium led by private equity firm EQT Partners, in a deal worth 10.2 billion Swiss francs ($10.12 billion).

Defensive stocks -- healthcare, utilities and real estate stocks -- also rose.

In basic materials, Norsk Hydro gained after a Brazilian federal court lifted one of two production embargoes on a plant owned by the Norwegian metals maker. (Reporting by Medha Singh in Bengaluru; editing by Larry King)