European shares fall as Daimler weighs, Sino-U.S. trade news awaited

By Susan Mathew and Medha Singh

(Reuters) - Weak German economic data and a profit warning from Daimler weakened European stock markets on Monday as investors reined in any bets on a fourth week of gains before G20 meetings that may see more trade talks between the U.S. and Chinese presidents.

Up 4% so far in June, the pan-European STOXX 600 index closed 0.25% lower on the day, with most of its major component markets in the red, led by a 0.5% dip in Frankfurt's DAX.

London's FTSE rose 0.1% thanks to gains in defensive plays including healthcare stocks. Traders also pointed to the weakness of the pound, which tends to boost the index's internationally-focused firms.

The main European index has shown signs of flagging in the past week after recouping almost all of its losses from a sharp sell-off in May, helped by expectations of more monetary stimulus globally.

Corporate newsflow continues to point to a slowdown in growth and Mercedes-Benz maker Daimler dropped 3.8% after it cut its 2019 earnings outlook and lifted provisions for issues related to its diesel vehicles by hundreds of millions of euros.

"The endless array of so-called one-time effects (on Daimler) raises questions regarding process, management information systems and ultimately accountability of management," Evercore ISI analyst Arndt Ellinghorst said in a research note.

Peers Volkswagen AG and Bayerische Motoren Werke AG also slipped, taking the European auto sector down 1.2%.

That, allied to data showing German business morale fell to its lowest level since November 2014 in June, saw the DAX post its worst session in a week.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping are expected to discuss trade on the sidelines of the summit in Japan, after talks to reach a broad deal broke down last month with the U.S. accusing China of reneging on previous commitments.

"The outcome from the Trump-Xi meeting promises significant implications for investors who are finalizing their outlooks for the second half of 2019," wrote Han Tan, Market Analyst at FXTM in a note.

"While the ... meeting is a meaningful step towards de-escalating tensions, markets could also be left disappointed."

The biggest gainer on Europe's main index was MorphoSys, up almost 6% after it presented data showing its blood cancer drug met its main goal in a study.

(Reporting by Amy Caren Daniel, Medha Singh and Susan Mathew in Bengaluru; editing by Patrick Graham and Andrew Heavens)