(Coquille in the title)

by Diana Mandia

(Reuters) – European stock markets ended sharply lower on Friday, as President Donald Trump’s statements on the possibility of imposing massive tariffs on Chinese imports added to concern over the political situation in France, where President Emmanuel Macron has yet to appoint a prime minister.

In Paris, the CAC 40 lost 1.53% to 7,918.00 points. In Frankfurt, the Dax fell 1.50% and in London, the FTSE 100 fell 0.86%.

The EuroStoxx 50 index ended down 1.68%, the FTSEurofirst 300 lost 1.24% and the Stoxx 600 fell 1.25%.

Over the week, the Stoxx 600 dropped 1.10% and the CAC 40 2.02%.

US President Donald Trump reignited trade fears on Friday when he said he was considering a massive increase in tariffs on Chinese imports, adding that there was no reason to meet Chinese President Xi Jinping in two weeks in South Korea, as originally planned.

The White House tenant justified his threat by claiming that China had sent letters to countries around the world to inform them of its intention to impose export controls on all production elements linked to rare earths.

In response, the dollar fell sharply against the Japanese yen, the euro and the pound sterling, and the New York Stock Exchange quickly fell into the red after opening higher. European stock markets increased their losses after the American president’s remarks.

“This is fuel to the fire. For a while, relations between Trump and Xi seemed to be improving, but China’s latest rare earth export control measures have Trump furious,” said Brian Jacobsen, an economist at Annex Wealth Management.

“It is difficult to know how to react to this (Trump’s comments). Given what has happened since the start of the year and the resilience of the markets, the temptation is great to minimize these announcements and take his words with a pinch of salt. We will have to wait and see what really happens,” said Chris Scicluna, analyst at Daiwa Capital Markets.

French politics had marked the rhythm of the European stock markets until Donald Trump’s comments, with investors still waiting, at the close of the Stock Exchange, for the appointment of a new Prime Minister after a meeting between the political parties at the Élysée and while time is running out to emerge from the political crisis triggered by the unexpected resignation of Sébastien Lecornu on Monday.

Olivier Faure, first secretary of the PS, said after a meeting at the Elysée that Emmanuel Macron had given “no clear response” to the demands of his political party, which cannot therefore give any guarantee of non-censorship to the future government likely to be formed soon.

VALUES

The semiconductor sector ended sharply lower on Friday, with ASM International NV losing 2.96%, Besi, ASML 4.22% and Soitec 6.02%.

The technology sector of the Stoxx, for its part, lost 2.9%, automobiles 2.2% and defense 1.8%.

A WALL STREET

At closing time in Europe, the Dow Jones fell by 1.12%, the Standard & Poor’s 500 by 1.51% and the Nasdaq Composite by 1.97%.

Shares of American clothing retailers Gap, Nike, Ralph Lauren and Lululemon fell around 2% after Donald Trump’s remarks.

American mining companies specializing in rare earths, such as Niocorp and Critical Metals, on the other hand, continue to rise after the American president’s warning to China regarding customs duties.

TODAY’S INDICATORS

American household morale remained rather stable in October, even if concerns about the job market and inflation persist, preliminary results of the monthly survey from the University of Michigan showed on Friday. The index was virtually unchanged at 55.0 this month, compared with 55.1 in September, while economists polled by Reuters had expected a decline to 54.2.

CHANGES

The dollar lost 0.58% against a basket of reference currencies, weighed down by Donald Trump’s comments.

The euro gained 0.44% to 1.1614 dollars.

RATE

Bond yields amplified their declines after President Donald Trump threatened to raise tariffs on imports from China.

The yield on ten-year Treasuries fell by 8.5 basis points to 4.0629%. The two-year for its part lost 6.4 basis points to 3.5348%.

In France, the ten-year OAT yield ended with a drop of 6.2 basis points to 3.4654%. The two-year fell 5.3 basis points to 2.0747%.

OIL

Oil prices fall after Israel and Hamas agreed on the first phase of a plan to end the war in Gaza. Their decline was amplified after Donald Trump’s comments on China.

Brent fell 3.79% to $62.75 per barrel and American light crude (West Texas Intermediate, WTI) lost 4.21% to $58.92.

TO BE CONTINUED ON OCTOBER 13:

(Written by Diana Mandiá, edited by Blandine Hénault)

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