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European shares fell on Monday as worries about US trade policies and concerns about German Chancellor Angela Merkel's coalition government weighed on sentiment. Economic data also failed to reassure investors with euro zone factory growth slowing to an 18-month low in June amid widespread concerns about new trade barriers. The pan-European STOXX 600 ended the session down 0.8 percent with losses across the continent and sectors.
"As has become the pattern of late, the markets sank on Monday morning following the latest weekend tariff talk from (US President) Donald Trump, presumably to leave investors scrabbling about for any signs of trade war-avoidance across the rest of the week," commented Spreadex analyst Connor Campbell.
The European Union has warned the United States that imposing import tariffs on cars and car parts would harm its own automotive industry and likely lead to counter-measures.
Germany's trade-sensitive DAX was down 0.6 percent. Merkel is to make a last-ditch effort to end a migration row with her conservative CSU allies by holding talks with her interior minister, whose offer to resign cast doubt over whether her fragile government can survive.
"The risk that the CSU may walk out of the government in Berlin, turning Merkel into the leader of a minority government, remains serious," said Holger Schmieding from Berenberg.
In Frankfurt, shares in consumer electronics retailer Ceconomy were up 8.6 percent after news that telecoms company Freenet, down 2.7 percent, would acquire a 9 percent stake.
In Paris, Airbus shares fell 2.5 percent after Bloomberg News reported the European planemaker would miss its delivery target for Pratt & Whitney-powered A320neo narrow-body jets this year.
French supermarket retailer Carrefour and British peer Tesco lost 0.9 percent and 0.2 percent respectively after they announced plans to form a global long-term purchasing alliance, as they seek to cut costs.
"An entente cordiale between the two giants of British and French retailing is yet another sign that squeezing the cost base is the biggest priority for supermarkets as they seek to contain the discounters and protect margins", said Neil Wilson chief market analyst at Markets.com.
In London, the FTSE 100 was down 1.2 percent as tensions over Brexit continue within Prime Minister Theresa May's cabinet and a new poll showed a record 75 percent of major British companies were now pessimistic about leaving the EU.
British gambling technology company Playtech posted the worst performance, losing over 26 percent after it disappointed investors with a trading update.
Among rare winners, British software company Micro Focus International was up 1.5 percent after it said it had agreed to sell its Linux operating system SUSE business to a private equity fund advised by Sweden's EQT Partners for $2.535 billion.
Milan's FTSE MIB was down 0.9 percent with Italian pharmaceutical group Recordati falling 12.5 percent after a consortium of investment funds controlled by CVC Capital Partners has agreed to buy a stake at a discount.

Copyright Reuters, 2018

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