Europe close: Stocks dip ahead of G7 summit, critical week

Stocks on the Continent finished slightly lower, but off their lows of the session in most cases, as traders played it safe going into the G7 Quebec summit at the weekend and what analysts at Danske Bank said was "the mother of all weeks ahead".

Setting the mood, following a meeting with his Canadian counterpart Justin Trudeau, on Thursday afternoon, French President Emmanuel Macron said: "No one is forever. Maybe the American president doesn't care being isolated today, but we don't care being six either, if needs be."

That drew a response from Donald Trump who took to social media to chastise his allies for what he said were their unfair trade practices and the impact they had on US agriculture.

Investors were also looking ahead to central bank policy meetings in the US, Eurozone and Japan next week, alongside the White House's decision, next Friday, on whether or not to impose tariffs on $50bn-worth of Chinese goods.

Against that backdrop, by the close of trading the pan-European Stoxx 600 was 0.21% or 0.82 points at 385.12, alongside a fall of 0.35% or 44.50 points to 12,766.55 for the German Dax.

The FTSE Mibtel on the other hand gave up 1.89% or 411.62 points to settle at 21,355.98, which was nearly the day's lows.

Markets were also watching government debt markets, with Mohammed El-Erian writing on Bloomberg: "And while the Fed has shown that a “beautiful normalization” is indeed possible, it remains to be seen whether all three central banks can deliver this simultaneously."

Indeed, longer-term Italian 10-year bonds were under selling pressure on Friday, but not so similarly-dated Spanish debt.

Against that backdrop, the currencies of the weakest emerging market economies were again under pressure too.

The US dollar was 1.46% higher against the Brazilian real to 3.9071, up by 0.86% to 4.5228 against the Turkish lira and advancing 0.33% versus the Argentine peso to 24.9850.

South Africa's rand was also in retreat, with the Greenback adding 1.53% to trade at 13.1739.

Economic data out at the end of the week was not very supportive either, with the latest industrial production figures out of Germany leading economists at Barclays Research to cut their forecasts for German GDP growth in the second quarter from 0.6% quarter-on-quarter to 0.4%.

Meanwhile, in Spain, the new government's spokesperson said tax increases had not been discussed at the first meeting of the new Cabinet, on Friday, but that there was room to improve social spending programmes without breaching the deficit targets agreed with Brussels.

Elsewhere, German industrial production fell by 1.0% month-on-month in April (consensus: 0.4%), according to the country's Ministry of Finance, albeit partially offset by an upwards revision to the prior month's reading of 0.7 percentage points to show a rise of 1.7% on the month.

In parallel, on a seasonally adjusted basis the country's trade surplus shrank from €21.6bn for march to €19.4bn in April, as imports jumped by 2.2% on the month. During the same month one year ago the trade surplus was at €19.5bn.