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European shares fall as growth worries grip

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European shares fall as growth worries grip
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, August 12, 2019. REUTERS/Staff   -   Copyright  STAFF(Reuters)
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By Susan Mathew

(Reuters) – European shares fell on Monday, with banks leading the decline, as worries that the protracted U.S.-China trade war could push the global economy into recession sent investors scurrying to safer assets.

Worsening protests in Hong Kong and a collapse in the Argentine peso added to the downbeat mood around the globe. [MKTS/GLOB]

The pan-European STOXX 600 index <.STOXX> pared early gains to close 0.3% lower, extending last week’s 1.7% loss when worries over an escalation in trade tensions and Italy’s political turmoil had weighed on sentiment.

A Goldman Sachs warning over the weekend that fears of the already prolonged trade war leading to recession are increasing and that a trade deal was unlikely before the 2020 U.S. presidential election, saw investors move to safe havens such as the Japanese yen, gold and bonds.

Germany’s Ifo survey echoed the growth concerns with its measures for current conditions and economic expectations both having worsened in the third quarter.

Last week’s dire industrial output data from Germany and the UK economy’s first contraction since 2012 were the latest evidence of growth pangs in Europe, with German economy’s growth numbers due on Wednesday being the next gauge.

“Every piece of news we’re seeing out of Europe in bearish,” said Jonathan Bell, chief investment officer at Stanhope Capital, pointing also to the European Central Bank’s disappointing stance at its last meeting.

The dour sentiment recently has seen bond yields dive and banks take a beating. On Monday, Europe’s banking index <.SX7P> lost 1.8% to hit an over three-year low.

Spain’s lender-heavy main index <.IBEX> led losses in the region, down 0.9%, with Credit Suisse saying Spanish banks’ sensitivity to rates and lack of visibility call for adopting a more cautious stance, adding to the gloom.

Another catalyst for markets this week could be the U.S. Federal Reserve’s annual symposium where investors hope to get some clarity on the future path of interest rates.

On the corporate front, the bidding war for Osram <OSRn.DE> ramped up after Swiss-listed sensor specialist AMS <AMS.S> said it was ready to pay 10% more than Bain Capital and Carlyle <CG.O>.

Osram, which is grappling with weakness in the automotive industry and a broader economic slowdown, is seen as a potential supplier for connected and autonomous cars.

Osram shares were up 10.4%, while AMS’s 11.8% decline was the most on STOXX 600.

Britain’s Tullow Oil Plc <TLW.L> jumped as much as 20% after it announced a major oil discovery in the Orinduik block in Guyana.

Among decliners, miners pushed the basic resources index <.SXPP> 0.4% lower as iron ore and copper prices fell.

(Reporting by Agamoni Ghosh and Susan Mathew in Bengaluru; Editing by Bernard Orr and Keith Weir)

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