European shares down on rising trade tensions

Euro zone shares tumbled on Friday as autos and banks stocks gave up their gains amid rising trade tensions which caused a selloff in the Chinese yuan and U.S. stock markets overnight.

Autos shares, the most sensitive to trade tensions as U.S. officials work toward slapping tariffs on car imports, were the biggest fallers, down 0.9 percent, having enjoyed some relief this week. Financials were the biggest drag as rising tensions in Italy’s ruling party drove a selloff in the country’s bonds.

Italy's FTSE MIB fell 0.5 percent, underperforming peers as bond yields rose, weighing on banks which are big holders of Italian debt. Euro zone banks fell 0.4 percent, sending the euro zone stocks index down 0.1 percent.

Despite several big earnings disappointments causing shares to slide, losses on the STOXX were limited by investors’ bid for sectors like healthcare and consumer staples, considered less risky.

Overall European stocks are expected to report stronger earnings growth in the second quarter, while investors are honing in on companies’ future guidance for any change due to current or potential tariffs, with autos particularly in focus.

Japanese stocks ended weaker as an earlier decline in the Chinese yuan rekindled worries about the stability of the world’s second largest economy, which faces rising risks from a major trade conflict with the United States. Japan’s Nikkei share average fell 0.29 percent to 22,697.88 while the broader Topix shed 0.26 percent to 1,744.98. However, both indexes posted their second straight weeks of gains.

Oil prices came under pressure on Friday from U.S.-China trade tensions and were on course for a third straight week of falls. Brent oil fell 14 cents to $72.44 a barrel by 1050 GMT. The expiring U.S. West Texas Intermediate (WTI) crude for August delivery was up 8 cents at $69.54 a barrel, while the September contract fell 18 cents to $68.08.