By Julien Ponthus
LONDON (Reuters) - European shares opened in positive territory on Friday as the trade dispute between the United States and China escalated with U.S. tariffs on $34 billion in Chinese imports taking effect and China immediately retaliating.
The pan-European STOXX 600 (STOXX) index was up 0.3 percent by 0830 GMT while Germany's exporter-heavy DAX (GDAXI) rose 0.2 percent.
Chinese stock markets also rose in late trading after initial losses close to two-year lows in the morning session.
"We're in a typical 'buy the rumor, sell the news'," scenario, said Stephane Barbier de la Serre, strategist at Makor Capital Markets, when asked why markets were not falling giving the trade dispute was moving unequivocally toward a trade war.
According to Barbier de la Serre, many investors still want to believe that the European Union will stay on the sidelines of the trade war or that the U.S. confrontation with China is just a negotiating posture, which will not lead to a fall in global trade.
He also noted that with high hopes for the new corporate earnings season beginning in less than two weeks, many traders were reluctant to short European stocks.
According to Tajinder Dhillon, senior research analyst at Thomson Reuters, second-quarter earnings for STOXX 600 companies are expected to increase 8.7 percent from the same period last year.
Among individual stocks, shares in Britain's Inmarsat (L:ISA) posted the worst performance and fell close to 9 percent after it rejected a takeover offer from Echostar.
Swedish lock maker Assa Abloy (ST:ASSAb) also fell sharply, down 7 percent after reporting a one-off costs of 6 billion crowns ($686 million).
Altice Europe (AS:ATCA) jumped 4.7 percent as speculation about potential mergers within the French telecoms are resurfacing and French conglomerate Bouygues (PA:BOUY) said it was ready to seize opportunities to beef up its telecoms business.
Germany's Thyssenkrupp (DE:TKAG) was up 3.4 percent after its CEO offered to step down, bowing to growing investor pressure for a more radical restructuring of the group.
Shares in French investment group Eurazeo (PA:EURA) jumped 4.5 percent, the STOXX 600's best performance, after HSBC lifted its rating for the stock.