By Helen Reid
LONDON (Reuters) - The latest episode in a trade dispute between the United States and other major economies sent European shares further into a funk on Monday with benchmarks down 0.8 to 1.2 percent and autos, basic resources and tech stocks the worst hurt.
A report that U.S. President Donald Trump plans to bar many Chinese companies from investing in U.S. technology firms and block more tech exports to Beijing hit Asian stocks overnight and dented early European trading.
Europe's tech sector (SX8P), which is mainly composed of hardware firms more sensitive to trade barriers, fell 1.2 percent on the news which could herald higher costs for companies.
Chipmakers BE Semiconductor (AS:BESI), Siltronic (DE:WAFGn), Infineon (DE:IFXGn), STMicro (MI:STM) and ASML (AS:ASML) were the biggest fallers, down 2.6 to 3.6 percent, while heavyweight software firms SAP and Micro Focus also dropped.
The autos sector (SXAP), a key target for Trump who said on Friday he aimed to hike tariffs on EU car imports by 20 percent, was the worst hit. It fell 1.4 percent, set for its seventh straight day of losses.
Analysts have downgraded their expectations for global autos stocks earnings worldwide as the trade war deepened over the past weeks.
Bank stocks (SX7P), highly sensitive to economic turmoil, were the worst-performing with Commerzbank (DE:CBKG) bottom of the DAX while HSBC (L:HSBA), Santander (MC:SAN) and BNP Paribas (PA:BNPP) led Europe-wide falls.
Overall, the pan-European STOXX 600 (STOXX) declined 0.7 percent while Germany's exporter- and autos-heavy index fell 0.9 percent. An Ifo survey reading showing that Germany's business morale fell in June added extra pressure on the DAX.
Overall investors have grown more risk-averse due to increasing tensions over trade, driving some to reconsider their pro-cyclical positioning.
"We recommend buying into trade-newsflow-driven market weakness as the stronger growth is what should ultimately prevail," said JP Morgan equity strategist Mislav Matejka.
He added however that further trade war escalation could jeopardize his positive position on the DAX, on cyclicals and exporters.
Industrials, which need unfettered access to markets, were also selling off. Airbus (PA:AIR), ABB (S:ABBN) and Siemens (DE:SIEGn) were among biggest drags on the STOXX.
Italian cable maker Prysmian (MI:PRY) fell 4.3 percent, the biggest loser on the STOXX, at the open after it cut its guidance due to additional expected costs related to issues with its UK WesternLink undersea cable project.
Among stand-out gainers, Danish medical equipment maker Ambu (CO:AMBUb) jumped 6.5 percent to the top of the STOXX after JP Morgan started coverage of it with an "overweight" rating.
Telenet (BR:TNET) also gained 5 percent after starting a 300 million euro share buyback program.
British mid-cap workspace group IWG (L:IWG) rose 5.2 percent after confirming it received a possible cash offer from private equity firm Terra Firma and is evaluating it.
In small-cap UK stocks, Britain's biggest real estate firm Countrywide (L:CWD) sank 23.4 percent after a profit warning, the latest in a host of UK companies to signal results would be hit by adverse market conditions.