UKX FTSE 100 Index

By Sara Sjolin, MarketWatch

Stoxx 600 set for worst week since early February selloff

European stocks dropped for a third straight day on Friday, heading for their lowest level in more than a year as trade war fears returned to the fore after tensions between the U.S. and China escalated.

What are markets doing?

The Stoxx Europe 600 index dropped 1.5% to 363.63, setting it on track for a 3.7% weekly loss, which would be its biggest since the global selloff in the week of February 9. If the benchmark ends at this level, it will mark its lowest close since early February, 2017, according to FactSet data.

Germany's DAX 30 index gave up 1.8% to 11,877.68, heading for a 4.1% weekly loss. France's CAC 40 index lost 2% to 5,066.67, while the U.K.'s FTSE 100 index slid 1% to 6,884.99 (http://www.marketwatch.com/story/ftse-100-heads-for-37-weekly-slide-as-markets-tumble-on-trade-war-fears-2018-03-23).

The euro rose to $1.2323, up from $1.2304 on Thursday. The pound fetched $1.4096, unchanged from Thursday.

What is driving the markets?

Investors dumped assets perceived as more risky after U.S. President Donald Trump announced import tariffs on as much as $60 billion of Chinese products. The plan has already triggered retaliatory actions from China (http://www.marketwatch.com/story/china-plans-3-billion-in-retaliatory-tariffs-against-us-goods-2018-03-22), which rolled out measures to impose tariffs on up to $3 billion of U.S imports, such as fruit, pork and recycled aluminum.

China's tariff list didn't include big-ticket U.S. exports such as soybeans and Boeing airplanes, interpreted as Beijing leaving room to escalate or negotiate.

Also on Thursday night, Trump formally approved temporary exclusions (http://www.marketwatch.com/story/eu-plus-six-other-nations-get-temporary-us-tariff-reprieve-2018-03-23) from steel and aluminum tariffs until May 1 for European Union nations and six other countries. The move, however, didn't calm traders in European steel companies, with shares of Thyssenkrupp AG (TKA.XE) (TKA.XE) down 2.7% and ArcelorMittal (MT) 4% lower.

What are strategists saying?

"Equity indices were a sea of red in every region, as the new U.S. tariffs aimed at China reignited concerns that the situation could escalate into a full-blown trade war between the world's two largest economies," said Marios Hadjikyriacos, investment analyst a foreign-exchange broker XM, in a note.

"Any new comments today from the Trump administration, and especially from [U.S. Trade Representative Robert] Lighthizer, will be particularly important for markets. Overall, risk aversion may continue to be the dominant theme in this environment and if so, one would expect to see similar market moves to yesterday. Namely, safe havens like the yen could continue to thrive, while riskier assets such as stocks may extend losses."

(END) Dow Jones Newswires

March 23, 2018 06:14 ET (10:14 GMT)

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