Europe close: Investors hope for best on trade front

Stocks on the Continent notched-up modest gains after the White House unveiled a more measured package of new trade tariffs on Chinese goods on Monday evening, although some analysts cautioned against reading too much into that.

Significantly, although Beijing with its own set of counter-tariffs on $60bn-worh of US exports, it did not slam the door shut to the possibility of talks.

As well, some economists, like those at Barclays, estimated that so long as trade tensions were restricted to the US and China, then the fall out would be modest, as trade flows were diverted by both sides towards other geographies.

They put the cost of reciprocal 20% tariffs on all exports between the two countries at 0.2 percentage points to the US and 0.4 points for China.

Nevertheless, others like Gregory Daco at Oxford Economics put the hit to real US GDP in 2019 from 25% US tariffs on $250bn-worth of Chinese goods and a 25% levy from China on all imports from America at about 1.0%.

For his part, Luius Kuijs at Oxford Economics added: "Prospects for a de-escalation are low in the short term, reflecting a wide gap in positions.

"But the likelihood of de-escalation will rise over time as the increasing economic impact in the US will make the Trump team less combative and China realizes that it will be hard to integrate more into the global economy without some concessions regarding its specific economic model."

At the close, the benchmark Stoxx 600 was 0.11% or 0.42 points higher to 378.73, alongside a 0.51% or 61.26 point advance for the German Dax to 12,157.67.

Milan's FTSE Mibtel meanwhile reversed earlier losses, adding 0.55% or 116.83 points to 21,228.23.

Ten-year Italian Treasury note yields were again lower on Tuesday, falling by six basis points to 2.79%, after the country's economics minister, Giovanni Tria, told a Bloomberg Forum event in Milan that Rome was aiming for a "manageable" budget.

On Monday night, the US administration announced that 10% tariffs on another $200bn-worth of Chinese exports would go into effect on 24 September, rising to 25% next year.

That was less than the 25% duty which had been expected until recently. Indeed, according to Capital Economics, the recent 6% drop in the yuan would nearly offset those tariffs, while more expansionary policies from Beijing would offset the remaining roughly half a percentage point hit to the annual rate of growth in the country's GDP.

Nevertheless, US President Donald Trump threatened to pursue tariffs on a further $267bn of Chinese exports if the Asian giant retaliated, which Beijing said it would.

The economic calendar for Tuesday was quite light, although ISTAT reported that industrial orders fell by 2.5% month-on-month in July, dragged down by declines in both domestic and foreign orders.

Corporate-wise, shares of online fashion retailer Zalando cratered after management warned on profits for fiscal year 2018, citing bad weather conditions in Europe, poor demand for clothing and increased discounting.