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May 6 (Reuters) - European shares fell sharply on Monday after U.S. President Donald Trump unexpectedly ratcheted up trade tensions between the world’s largest economies by vowing to hike tariffs on Chinese goods by this week, prompting investors to flee riskier assets.
Germany’s DAX – the most sensitive to China and trade war fears - and France’s CAC led declines, down 1.7 percent and 1.8 percent respectively. The pan-European STOXX 600 index shed 1.2 percent by 0720 GMT, its steepest fall in six weeks.
Bourses in Italy, Spain and France also fell more than 1 percent while markets in Britain remained shut for a bank holiday.
Hopes of a U.S.-China trade deal have partly been the reason for the strong rally in equities this year, with most country indices recovering from a major rout last year and hitting multi-month highs.
Oil prices slumped and Asian shares took a beating after Trump, in an unexpected move to mount pressure on China, said on Sunday that trade talks with China were proceeding “too slowly”, and that he would raise tariffs on $200 billion of Chinese goods to 25 percent on Friday from 10 percent.
Auto stocks’ 3 percent slump led broad based declines among European sectors. In a relatively light day for earnings, dealmaking was in focus.
French energy major Total said it had reached a binding agreement with Occidental to acquire Anadarko assets in Algeria, Ghana, Mozambique and South Africa for a consideration of $8.8 billion.
Telecom was another sector of interest as Norway’s Telenor said it is in negotiations with Malaysia’s Axiata Group to form a telecoms holding company. Telenor shares rose 3.8 percent.
ThyssenKrupp lost 3.3 percent after the company said it still saw scope for agreement with European antitrust regulators on a planned joint venture with Tata Steel despite a report that Brussels was likely to block the deal.
Chipmaker stocks AMS, STMicro and Siltronic , which are highly sensitive to trade war news, lost between 3.2 to 6.4 percent.
Luxembourg-based auto supplier Stabilus slid after the company cut its full-year guidance on account of the ongoing weakness in the global auto industry.
Meanwhile, British Prime Minister Theresa May on Sunday stepped up calls for Labour Party leader Jeremy Corbyn to agree a cross-party deal to leave the European Union, following poor results for both parties in local elections on Thursday. (Reporting by Medha Singh and Agamoni Ghosh in Bengaluru; Editing by Toby Chopra)