By Helen Reid
LONDON (Reuters) - European shares fell for a second day on Friday on reports that U.S. President Donald Trump is planning more tariffs on China, with Europe's STOXX posting its worst monthly performance since February.
The pan-European STOXX 600 (STOXX) ended the session down 0.8 percent. Germany's DAX (GDAXI), heavier in trade-sensitive industrial stocks, fell 1 percent.
All sectors except one were in negative territory. Sparring over trade between Trump and the European Union weighed on car stocks (SXAP), down 1.6 percent and the worst-performing sector.
Trump was reported to have rejected an EU offer to eliminate car tariffs, saying its trade policies are "almost as bad as China". European Commission President Jean-Claude Juncker said the EU would respond in kind if the U.S. imposed car tariffs.
"It's very hard to see a decisive resuscitation of risk appetite until these tensions are resolved," said Paul O'Connor, head of the multi-asset team at Janus Henderson Investors.
"We have learned to under-react to some of the individual headlines because if you try to extrapolate from any of them you could find yourself in big trouble."
Daimler (DE:DAIGn), Volkswagen (DE:VOWG_p), BMW (DE:BMWG), and Continental (DE:CONG) were among the biggest weights on the DAX, falling 1.4 to 1.9 percent.
In contrast, Whitbread (L:WTB) soared as much as 19 percent after the UK company agreed to sell its Costa Coffee chain to Coca-Cola (N:KO) for 3.9 billion pounds ($5.1 billion).
Traders said the deal's value exceeded the market's expectations by 500 million to 900 million pounds and was wrapped up more quickly than expected. Most of the cash will be returned to shareholders.
Sage (L:SGE) tumbled nearly 8 percent, one of the biggest decliners among European stocks, after the British software developer surprised the market by announcing Chief Executive Stephen Kelly would stand down in May next year.
"This will leave a hole and raise further questions about reaching such targets," said Neil Campling, co-head of the global thematic group at Mirabaud Securities. "This is one we wouldn't be bottom fishing right now."
While trade disputes have caused uncertainty and volatility, investors drew comfort from strong earnings. https://reut.rs/2LAe0Mw
"Concerns around trade are not significantly affecting macro and market fundamentals at this stage. There's still a fairly strong global recovery, earnings forecasts remain resilient across the board," said Janus Henderson's O'Connor.
"It limits the upside but isn't something that is changing our perception of broader market fundamentals."
Analysts have, however, adjusted their earnings expectations for autos stocks since the trade war broke out.
