By Danilo Masoni
MILAN (Reuters) - European shares fell slightly in late morning trade on Tuesday, reversing a positive open as investors remained cautious due to worries the U.S. could slap new tariffs on imports from China.
Losses in British advertising group WPP (LON:WPP) after a margin outlook cut and weakness among telecoms also weighed, dragging the STOXX 600 index (STOXX) 0.27 percent lower by 0902 GMT.
Washington is expected to decide whether to implement a plan to tax an extra $200 billion of Chinese imports following a public comment period that expires on Thursday.
WPP was the biggest faller on the pan-European index, down 7.3 percent, after the company said profitability would decline this year, although a rise in sales helped it nudge its full-year net sales outlook higher.
"WPP is weak because there is a margin outlook cut for 2018 and the message is that turning around this behemoth is going to take time and be costly," said Neil Campling, Co-Head Global Thematic Group at Mirabaud Securities.
"There was also some hope that we might see quick progress on asset sales or merging of units but the message from the new CEO is not to expect wholesale changes," he added.
Telecoms were the biggest sectoral fallers, down 1 percent, and led lower by Telecom Italia (MI:TLIT) which fell 5.5 percent after Exane BNP Paribas (PA:BNPP) downgraded the stock to underperform from neutral, saying the market underestimated the threat from fiber competition.
In France, telecoms operator Iliad (PA:ILD) cut its mid-term profitability targets after suffering in the first half its first loss of mobile subscribers since the launch of its mobile business in 2012. However, its shares, which have already fallen more than 40 percent this year, rose 4 percent.
Financials were the biggest gainers, supported by strength among some Italian banks as government bond yields fell following soothing comments from Italian ministers on forthcoming budget proposals.
Among Italian banks, which are seen as a proxy for political risk due to their large sovereign debt holdings, UBI Banca (MI:UBI) led the way, up 4.3 percent, while Banco BPM (MI:BAMI) and BPER Banca (MI:EMII) rose more than 2 percent.
"We guess the ruling coalition doesn't want to (commit) suicide by presenting 2019 deficit targets near 3 percent compared to the 0.8 percent planned. We guess they will present something acceptable and incorporated in BTP and Stock market prices," said Fidentiis in a note to clients.
Danske Bank's (CO:DANSKE) woes weighed on its shares, which were down more than 4 percent following a report suggesting its Estonian branch handled $30 billion of non-residents' money in 2013.
ING Groep (AS:INGA) also fell, down 2.8 percent, after news the Dutch bank will pay 775 million euros in a settlement with prosecutors, who accused its financial controls of being so poor that customers were able to easily launder money.
Elsewhere, Scor (PA:SCOR) rose 8.7 percent after the French re-insurer rejected a friendly takeover offer by Covea.