Europe close: Stocks drop as Trump ramps up trade war rhetoric; autos under pressure

European stocks ended in the red on Friday, with the auto sector pacing the decline as US President Trump ramped up his trade war rhetoric.

The benchmark Stoxx Europe 600 index fell 0.2% to 385.62, Germany's DAX ended down 1% at 12,561.42 and France's CAC 40 was 0.4% lower at 5,398.32 after it emerged that Trump said in an interview with CNBC on Thursday that he was ready to impose tariffs on all $500bn of Chinese imports if China doesn't bow to US complaints about its trade policies.

The Stoxx 600 autos and parts index ended down 2.1% at 559.71.

In the interview, Trump criticised the Federal Reserve's interest rate rises, made it clear he wants a weaker dollar and said he was "ready to go to 500" on Chinese imports.

"Because we go up and every time you go up they want to raise rates again…I am not happy about it," Trump told CNBC. "But at the same time I’m letting them do what they feel is best.

"I don’t like all of this work that we’re putting into the economy and then I see rates going up."

The US President also attacked the European Union and China over their currency weakness.

Capital Economic said: "The US currently plans to impose tariffs on imports from China worth $250bn, out of a total of just over $500bn last year, so this latest threat would represent a significant step up in its protectionist trade policies if enacted."

In corporate news, Stora Enso tumbled after the Finnish pulp and paper manufacturer said second-quarter net profit rose 49% to €213m.

Steelmaker SSAB slumped after its second-quarter earnings missed analysts' expectations, but Remy Cointreau gained ground after posting a rise in first-quarter sales despite unfavourable currency movements.

France's Thales ticked up after the defence electronics group reported an increase in first-half profits and said its planned takeover of Gemalto was on track.

Hermes nudged higher after the luxury handbag maker said it expects first-half operating profit to remain near the record levels of last year and posted a 7.2% jump in second-quarter sales.

On the data front, figures from the European Central Bank showed the seasonally-adjusted current account surplus in the eurozone fell to €22.4bn in May from a revised €29.6bn the month before.

Pantheon Macroeconomics analyst Claus Vistesen pointed out that a big decline in the primary income surplus - to €3.0bn from €9.0bn in April - was the main driver of the headline decline in May.

"Elsewhere, the movements were marginal. The goods and services surpluses fell trivially, while the secondary income deficit- mainly foreign aid and workers’ remittances - narrowed slightly. In the 12-month ending May, the overall surplus stood at 3.6% of GDP, 0.4 percentage points higher than in the same period last year."

Looking ahead to next week, the main event will be the European Central Bank's policy meeting on Thursday.

"Having announced last month that asset purchases will end in December, the Bank is unlikely to make any further policy changes for now," Capital Economics said.