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European shares steadied on Thursday after logging their worst day since last December on the slapping of US tariffs on a raft of European exports, with a bounce for Airbus and luxury goods makers pushing main indexes back into the black.
The blue-chip and wider STOXX 600 pan-European indexes sank almost 3 per cent on Wednesday after the World Trade Organisation approved 10 per cent tariffs on European-made Airbus planes and 25 per cent duties on goods ranging from French wine to Scotch whisky.
After the initial shock of the decision, however, read as threatening a new transatlantic trade war, many analysts said that the detailed list of products affected showed the actual economic impact of the tariffs should be minimal.
Shares of Airbus, down 2 per cent on Wednesday, jumped 4.5 per cent in early trade, as the list - published after European markets closed on Wednesday - showed it had exempted some Airbus parts.
Luxury brands including French spirits maker Remy Cointreau and Louis Vuitton owner LVMH were also excluded and the euro zone blue-chip index gained 0.4 per cent.
“The reaction this morning is just muted because you had two big days of sell-off,” said Claudia Panseri, a strategist at UBS.
“For the time being, the total amount (of the tariffs) at this stage is very small. I don't think there will be retaliation. US-China trade (tensions) definitely has more of an impact.”
The broader pan-European STOXX 600 index edged 0.1 per cent higher, with the food & beverage sector leading gains with a 0.9 per cent rise.
Growth worries continue to dog markets. Data on Thursday showed euro zone business growth stalled in September, suggesting that a contraction in manufacturing activity was increasingly spilling over to the services industry.
A prolonged tit-for-tat trade war between Washington and Beijing and a worsening outlook for a quarterly earnings season that is just getting underway, has hurt European sentiment after a bullish September.
Ted Baker Plc plunged 35 per cent after the British fashion retailer reported a first-half pre-tax loss and warned of the worst business conditions for retailers in 30 years.
H&M shares, however, jumped 7.0 per cent after the world's second-biggest fashion retailer reported its first quarterly rise in pre-tax profit in over two years. That helped the retail index gain 0.3 per cent.
The Frankfurt Stock Exchange will remain shut on Thursday for the Day of German Unity public holiday.
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