Europe close: Trade tensions weigh on stocks

An unexpectedly weak reading on German factory orders at the start of the week helped to underline the impact that uncertainty around global trade was already having on the euro area's largest economy.

In the background meantime, the news headlines were dominated throughout much of the session by the ongoing trade spat, especially between China and the US, although some equity analysts remained somewhat upbeat.

"Trade concerns continue to buffet market sentiment, with the US and China taking turns to threaten further tariffs," said Mike van Dulken at Accendo Markets.

Against that backdrop, by the end of trading the benchmark Stoxx 600 had slipped by 0.13% or 0.50 points to 388.66, alongside a fall of 0.14% or 17.55 points to 12,598.21 for the German Dax.

The FTSE Mibtel meanwhile was down by 0.26% or 57.09 points to 21,529.80.

In parallel, euro/dollar was off by 0.11% to 1.1556 as the Greenback strengthened amid the heightened risk aversion.

Data published on Monday revealed an unusually sharp - and very much unexpected - 4.0% month-on-month decline in German factory orders in June, with those coming from outside the single currency bloc shrinking by 5.9%.

On the back of those figures, economists at Barclays Research cut their forecast for the quarterly rate of German GDP growth over the three months to June by two tenths of a percentage point to 0.4%.

Regarding China, at the weekend, the US president claimed his country had gained the upper hand in its trade dispute with the Asian giant, to which China's Global Times responded in a Sunday editorial that Beijing was prepared for a "protracted war" and did not fear incurring in short-term economic costs.

"Considering the unreasonable U.S. demands, a trade war is an act that aims to crush China's economic sovereignty, trying to force China to be a U.S. economic vassal," the Global Times, a tabloid which some observers believe is a pseudo mouthpiece for officials Beijing, said.

Also making itself felt in markets, speaking at the Aspen Institute's 25th Annual Summer Celebration Gala on Saturday, JP Morgan boss, Jamie Dimon, said investors should be prepared to see yield on 10-year US government debt reach 5.0% or more.

However, Dimon also said the current bull markt for stocks might yet extend for another two or three years.

On the corporate front, industrial gases firm Linde was in the spotlight after the US Federal Trade Commission said it and US rival Praxair may need to sell more assets before their tie-up can be approved.

Also in Germany, Moody's lowered its rating on Deutsche Bank's senior debt from Baa2 to Baa3.