European stocks slip as Syria anxiety 'takes center stage'

European stocks lost ground Wednesday, as analysts said a U.S. military action against Syria was possible and could spook markets.

A pan-European equity benchmark continued to show a small weekly gain, helped by worries receding over the ongoing trade skirmish between China and the U.S., the world’s two largest economies.

How markets are moving

The Stoxx Europe 600

SXXP, -0.74%

shed 0.7% to 375.70, trimming its week-to-date rise to 0.2%.

Germany’s DAX 30

DAX, -0.98%

dropped 0.9% to 12,284.80, while France’s CAC 40

PX1, -0.72%

gave up 0.7% to 5,271.83. The U.K.’s FTSE 100

UKX, -0.13%

pulled back 0.2% to 7,249.84.

The euro

EURUSD, +0.2509%

traded at $1.2363, little changed from $1.2356 late Tuesday in New York.

What’s driving markets

In a fresh geopolitical concern for investors, the possibility of a U.S. strike against Syrian President Bashar al-Assad appeared to be growing, with President Donald Trump and his administration working to rally international support. Talk of such a strike has been simmering since a suspected chemical-weapons attack killed civilians in Damascus over the weekend.

Fears about a potential global trade war have persisted for weeks. While the Trump administration exempted most countries from recent U.S. tariffs on imports of steel and aluminum, its targeting of Chinese goods has fanned fears.

Yet concerns appear to be ebbing this week, thanks to a less-aggressive stance on trade taken by Chinese President Xi Jinping in a key speech Tuesday.

However, the head of the International Monetary Fund, Christine Lagarde, warned in a speech in Hong Kong Wednesday that the return of protectionism risked tearing apart the current system of regulating trade.

Read: How China’s Xi, without blinking on trade, got the stock market to cheer

And see: Here’s how a ‘trade skirmish’ could become a global ‘trade war’

What strategists are saying

“The trade tensions between the U.S. and China have eased as the geopolitical situation in Syria takes center stage,” said FxPro analysts in emailed comments.

“The markets may react to any strike with a move to risk-off sentiment,” they said.

Stock movers

Tesco PLC shares

TSCO, +5.52%

climbed 5.3%, for one of the Stoxx Europe 600’s biggest gains. The U.K.’s No. 1 grocer by market share declared its first year-end dividend in four years and said that its pretax profit had increased multifold.

TGS-NOPEC Geophysical Co.

TGS, +5.05%

soared 6%, building on the prior day’s leap that came after the Norwegian oilfield-data provider posted better-than-anticipated quarterly revenue. The stock is up 22% this week.

Deutsche Telekom AG

DTE, +1.08%

jumped 3.5% in the wake of reports that American wireless carriers Sprint Corp.

S, +17.12%

and T-Mobile US Inc.

TMUS, +5.67%

have rekindled merger talks. The German telecom controls T-Mobile.

Air France-KLM

AF, -0.48%

was little changed, giving up an earlier gain that came as the airline said it has invited unions to pay negotiations starting Thursday in a bid to end current strike action.

Chr. Hansen Holding A/S

CHR, -1.98%

tumbled 3.2% after the Danish maker of food ingredients issued a disappointing quarterly update. The company cut its growth outlook for its natural-colors business below its long-term goal of around 10%, a Reuters report said.

Barry Callebaut AG

BARN, -7.28%

fell 5.8% for the Stoxx 600’s largest drop after the Swiss chocolatier said revenue rose during the fiscal year’s first half. UBS analysts said there is a risk of slowing volumes in the second half, according to a Dow Jones Newswires report.

Economic news

European Central Bank President Mario Draghi had been due to kick off a speech and a question-and-answer session starting at noon London time, or 7 a.m. Eastern Time. His comments are part a Frankfurt event that’s tied to an ECB competition for students.

European traders also likely will keep an eye out for economic releases from the world’s largest economy. The U.S. consumer-price index for March is due at 12:30 p.m. London time, and minutes from the most recent Federal Reserve meeting are scheduled to hit at 7 p.m. London time.

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