European Stocks Hit By Trump Tariff Threat, Wall Street Flat

European stocks were hit Wednesday by US President Donald Trump's renewed threat to slap auto tariffs on imported cars and a gloomy auto sales forecast.

But Wall Street finished flat little moved either by strong earnings or a rising death toll blamed on a virus from China.

Markets in London, Frankfurt and Paris closed lower after Trump once again wielded the threat of a 25 percent punitive tax on European cars if Brussels fails to agree to a trade deal.

Analysts at Charles Schwab brokerage described traders as fairly cautious as the region mulled "the possibility of a showdown between Europe and the US."

As trading wound down in Europe, the auto sector association ACEA contributed to the wary mood with a forecast that European new car sales would fall by two percent this year, their first decline in seven years.

Shares in carmakers Volkswagen slid by 1.2 percent and Daimler lost more than two percent, with Mercedes-parent Daimler also warning that its 2019 earnings could fall short of expectations owing to massive new charges related to diesel emissions cheating.

And after markets closed, Volkswagen got more bad news after a Canadian court ordered the carmaker to pay Can$196.5 million (US$150 million) after the automaker pleaded guilty to violating environmental laws in the long-running emissions cheating scandal.

Before Trump issued his latest trade threats, Frankfurt's DAX 30 index had hit a record high at 13,640.06 points, with dealers hailing a recent China-US trade deal.

"German companies are among the most exposed to global trade worries, and therefore those enjoying the biggest bounce since US-China relations improved at the back end of last year, resulting in this month's trade deal," said Markets.com analyst Neil Wilson.

The outbreak of the deadly virus comes days before the Lunar New Year festival, with millions of people beginning to criss-cross China AFP / NICOLAS ASFOURI

In Davos, Switzerland, European Commission President Ursula von der Leyen highlighted prospects for a wider trade truce, saying that an accord between Europe and the United States was also possible within weeks.

US stock markets shrugged off corporate earnings news but seemed a little less on edge about the possible spread of the deadly coronavirus in China.

Boeing continues to weigh on Wall Street and lost another 1.4 percent, even though the company's new CEO, David Calhoun, tried to boost confidence with in first public statements -- giving his full support to the top-selling 737 MAX, which has been grounded since March after two deadly crashes.

Earlier in the day, Asian markets had bounced back on bargain-buying following sharp losses on Tuesday that were triggered by the virus.

"Fears of the spreading coronavirus appear to be easing a bit after China said it is taking steps to contain the virus," Schwab analysts said.

Global equities have been roiled this week news of the Chinese virus outbreak which has killed more than a dozen and sickened hundreds, could cause as much economic damage as the SARS epidemic that left hundreds dead in 2003.

The World Health Organization was meeting Wednesday to determine whether to declare a global public health emergency over the disease, which has also been detected in Thailand, Japan, South Korea, Taiwan and the United States.