European shares retreat on trade tensions

By Danilo Masoni and Julien Ponthus

MILAN/LONDON (Reuters) - European shares fell for a second day on Monday as worries over a trade war between the United States and China continued to keep investors on the edge, while cable maker Nexans <NEXS.PA> plummeted after a profit warning.

The STOXX 600 <.STOXX> index fell 0.8 percent following losses in Asia and a weak open on Wall Street after U.S. President Donald Trump cranked up trade tensions by going ahead with tariffs on Chinese imports, prompting Beijing to immediately respond in kind.

"Investors continue to react to Friday's ramping of unwelcome US-China trade tensions," said Accendo Markets analysts Mike van Dulken and Artjom Hatsaturjants.

The pan-European benchmark erased all the gains it made on Thursday when the ECB said interest rates would stay at record lows at least through the summer of 2019.

Germany's DAX <.GDAXI> declined 0.8 percent, underperforming the broader European market amid worries that a crisis over migration policy could destabilise Angela Merkel's three-month-old coalition government.

Adding to the pressure, Trump, who regularly complains about Germany's trade surplus and car exports, directly criticised Merkel's government. "The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition," he wrote on Twitter.

Car maker Volkswagen <VOWG_p.DE> suffered the most, down 3.3 percent, followed by sportswear maker Adidas <ADSGn.DE>, which lost 2.7 percent.

"With the chancellor desperate to maintain a coalition to maintain her dominance over German politics, markets are understandably jittery at the thought of any political upheaval in the biggest economy in Europe," commented IG market analyst Joshua Mahony.

France's Nexans fell 16 percent after the company warned that an "abrupt deterioration" of its high-voltage activities was likely to translate into lower profits for the full year.

The warning also weighed on Italian rival Prysmian <PRY.MI>, which fell 1.6 percent.

French gas and power group Engie <ENGIE.PA> fell 4.8 percent after saying unscheduled outages at its Belgian nuclear reactors will have an impact of 250 million euros on its 2018 core and net profit.

Aerospace supplier Cobham <COB.L> soared 4.6 percent after an upgrade to overweight from Morgan Stanley.

"We think current management have stabilised performance, with necessary costs sunk and measures taken to aid operational delivery," analysts at the U.S. bank said.

Norwegian Air Shuttle <NWC.OL> rose 10.1 percent after Lufthansa <LHAG.DE> said it was in contact with the Norwegian carrier over a possible combination.

Norwegian is also the subject of bid interest from British Airways owner IAG <ICAG.L>. IAG gained 0.7 percent and Lufthansa shares declined 0.6 percent.

(Reporting by Danilo Masoni and Julien Ponthus; Editing by Matthew Mpoke Bigg and Peter Graff)