Europe close: Stocks skid lower as trade risks intensify

Stocks finished lower, but off their worst levels, as traders waited on the outcome of the rapidly-escalating trade threats between the US and China.

Unsurprisingly perhaps, speaking at the European Central Bank's 2018 Forum in Sintra, Portugal, the president of the Governing Council, Mario Draghi, said that "uncertainty permeates the economic outlook," arguing that policy needed to remain "patient, persistent and prudent".

His words sent the single currency duly lower.

On a related note, earlier the prestigious IFO institute slashed its forecast for German GDP growth in 2018 and 2019, with its forecast for the current year dropping by 0.8 percentage points to 1.8%, due to the less "dynamic" external environment now anticipated.

At the end of trading, the benchmark Stoxx 600 was down by 0.70% or 2.70 points at 383.21, alongside losses of 1.22% or 156.14 points to 12,677.97 for the German Dax.

Nevertheless, both equity benchmarks were off their worst levels of the day.

The FTSE Mibtel on the other hand ended down by just 0.07% or 14.94 points to 22,084.33.

In parallel, euro/dollar was down by 0.38% at 1.15785, while the yield on the benchmark 10-year German government note was three basis points lower to 0.37%.

Overnight, the US administration had ratcheted up the pressure on Beijing, announcing preparations to foist 10% tariffs on another $200bn-worth of Chinese goods after China responded to earlier levies with its own retaliatory measures.

Commenting on the fresh threat of tariffs from the White House, analysts at Oxford Economics said: "President Trump has upped the ante on the trade conflict between the two.

"China has quickly vowed to retaliate - and if such an escalation does materialise, it would have significant economic impact on China, the US and the rest of the world, at a sensitive time for the global economy. In principle, there is still room for negotiation and we cannot rule out de-escalation in the coming weeks."

Elsewhere on the economic front, Eurostat reported construction sector output in the single currency bloc was up by 1.8% month-on-month in April.

Those figures came alongside a current account surplus of €28.4bn for the same month, as per the latest ECB data.

Oblivious to the turbulence in global capital markets, stock in Norwegian Air was again higher, after its boss, Bjorn Kjos, said the carrier had attracted bids from various potential bidders and that - given the right terms - the company was open to striking a deal.