Europe open: Shares rally despite threat of all-out trade war

(Sharecast News) - European shares rallied at the open on Tuesday after a three-day battering despite fears of an all-out trade war after China said it would "fight to the end" in response to US President Donald Trump's threat of 50% in extra tariffs if Beijing didn't withdraw its own retaliatory levies.

The pan-regional Stoxx 600 index was up 1.56% in early trade at 481. Germany's DAX gained 1.14% and Britain's FTSE 100 1.26%.

"It was almost inevitable that risk appetite would recover somewhat after the cataclysmic selling and doom-laden commentary of the past week. Stocks have rallied off their lows as investors seize on comments that indicate negotiations over tariffs are beginning," said Chris Beauchamp, chief market analyst at online trading platform IG.

"Sentiment remains fragile, and with China pledging to fight 'to the end' and the EU announcing fresh tariffs (albeit delayed for now) we are not out of the woods yet."

"The focus is now on the data to see how tariffs are affecting the economy. This week's US inflation print is too early, but with earnings season rapidly approaching we may get a chance to see how companies are dealing with the new reality."

Trump made the threat late on Monday, a move described as "a mistake on top of a mistake, which once again exposes the US's blackmailing nature", Agence France-Presse quoted a Chinese Commerce Ministry spokesperson as saying on Tuesday.

"China will never accept this. If the US insists on going its own way, China will fight it to the end. If the US escalates its tariff measures, China will resolutely take countermeasures to safeguard its own rights and interests."

Stockmarkets have been in turmoil since last week when Trump unveiled sweeping tariffs against all trading partners, raising fears of a global recession.

China, which has been hardest hit, responded with 34% duties on US goods to come into effect on Thursday. The Commerce Ministry on Tuesday also reiterated that it sought "dialogue" with the US, and that there were "no winners in a trade war".

US shares pared losses overnight from previous days, while the tech-heavy Nasdaq index made small gains. Oil prices also enjoyed some respite, with Brent crude up 1% to $64.85 a barrel.

Trump last week announced swingeing tariffs of 10% - 50% against all of America's trading partners - including Australian islands inhabited only by penguins - which will come into effect on Wednesday.

He hit China with a 34% tariff on imports in addition to an existing 20% levy. Beijing responded with a reciprocal 34% tariff on all US imports, prompting Trump's latest threat if Beijing did not back down.

In equity news, industrial pipe maker Vallourec surged by 6% after winning an order from Algeria's National Oil and Gas company.

Reporting by Frank Prenesti for Sharecast.com