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Europe close: Stocks slump as nuclear tensions flare-up

European equities finished sharply after the US administration called of a planned summit with North Korean leader Kim Jong-Un which had been planned for early June.
In a letter addressed to Kim, President Donald Trump cited "the tremendous anger and open hostility displayed in your most recent statement" as the reason why the US decided to opt out.

Earlier during the session, a top North Korea official had criticised Mike Pence's remarks, from Monday, in which the US vice-president reiterated that the North Korean government might end up like that of Libyan leader Muammar el-Qaddafi, adding that America could choose between the summit or a nuclear showdown.

Those comments from North Korea followed others, made during the previous week, in which Pyongyang's stance had reportedly appeared to harden with respects to the possibility of it completely scrapping its nuclear deterrent.

Financial markets had already been trading on the back foot prior to the decision taken by the White House following a report in the Journal according to which the Trump administration was considering imposing new tariffs on vehicle and auto-parts imports of as high as 25%.

Against that backdrop, by the close of trading the benchmark Stoxx 600 was down by 0.52% or 2.04 points to 390.54, alongside a fall of 0.94% or 121.75 points to 12,855.09 for the German Dax and a retreat of -0.71% or 162.63 points to 22,749.08 for the FTSE Mibtel.

"Germany's benchmark DAX had been flat most of the afternoon, caught between the tailwind of a more dovish Federal Reserve and the headwind of possible US tariffs on European auto parts," explained Jasper Lawler, head of research at LCG.

"It was only when US President doubled-down on the political uncertainty by cancelling his planned meeting with North Korea leader Kim Jong Un that European indices turned lower."

As investors sought refuge from the selling, even longer-term Italian government bonds found a small bid.

On the economic front, the minutes of the European Central Bank's last policy meeting showed that policymakers believed the recent slowdown in growth was mostly due to temporary factors, while underlying price pressures were still weak.

But analysts at Barclays Research believed the June meeting of the ECB's Governing Council was likely to be "lively".

To back up their claim, they pointed to the recent downside surprises in economic data at the start of the second quarter, the risks to financial stability on the back of recent events in Italy, and likely upwards pressures on prices.

Earlier, Germany's Ministry of Finance confirmed that the country's GDP expanded at a 0.3% quarter-on-quarter clip over the three months to the end of March.

In other data, GfK reported that the country's consumer confidence index slipped from a print of 10.8 for May to 10.7 in June.



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