By Danilo Masoni
MILAN (Reuters) - European shares fell on Friday after U.S. President Donald Trump warned of further tariffs on China, although the losses were limited by gains among defensive stocks like utilities.
The pan-European STOXX 600 (STOXX) fell 0.5 percent by 07.58 GMT, erasing part of Thursday's 2.4 percent gain. It remained on track for a weekly advance of 0.9 percent. Germany's exporter-heavy index DAX (GDAXI) fell 0.7 percent.
Trump on Thursday directed U.S. trade officials to identify another $100 billion of tariffs on Chinese imports, escalating a confrontation between the world's two largest economies. However, investors remained doubtful that a full-blown trade war would break out.
"Markets will now watch both the rhetoric from Trump's cabinet members and China's response to assess whether risk of a trade war is materially higher," Credit Suisse (SIX:CSGN) said. "We continue to see a trade war as unlikely".
Caution still dominated, boosting defensive stocks. French utility Suez (PA:SEVI) led the sector higher, up 2.8 percent, further boosted by a bullish broker note.
Elsewhere among top movers, Dufry (S:DUFN) rose 3.5 percent after the Swiss retailer proposed a higher-than-expected dividend and announced a share buyback.
UK's Marks & Spencer (L:MKS) fell 3.3 percent and Next (L:NXT) lost 2.1 percent after Citi downgraded both stocks, among other retailers.
Telecom Italia (MI:TLIT) rose 2.2 percent after Italian state lender CDP said it would buy a stake of up to 5 percent in the telecoms company.
Chip makers like Infineon (DE:IFXGn) fell after losses overnight by Samsung Electronics (LON:0593xq) shares (KS:005930). The South Korean tech giant was hit by growing concern that a semiconductor boom is about to end.
The trade-exposed auto sector (SXAP) was the leading sectoral loser, down 2 percent.
Later in the day, the focus will turn to the U.S. jobs report for more clues on how fast monetary policy will normalise in the United States.
That could affect the outlook for the dollar, whose weakness has pushed up the euro, clouding prospects for European earnings. According to the Thomson Reuters IBES data, first- quarter earnings growth for the STOXX is seen at 3.4 percent, compared with 18.5 percent for the S&P 500.