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By Sara Sjolin and Victor Reklaitis, MarketWatch

Rising tensions between China and the U.S. also spook investors

European stock markets finished in the red Monday, as Angela Merkel's tenure as Germany's chancellor came under threat and the trade conflict between the U.S. and China remained in focus.

What are markets doing?

The Stoxx Europe 600 index dropped 0.8% to close at 385.91, building on a 1% loss from Friday.

Germany's DAX 30 index fell 1.4% to end at 12,834.11, while France's CAC 40 gave up 0.9% to finish at 5,450.48.

The U.K.'s FTSE 100 slipped less than 0.1% to end at 7,631.33.

The euro dipped to $1.1606 from $1.1609 late Friday in New York.

What is driving the market?

Trade tensions remained in the spotlight after China announced plans for retaliatory tariffs on U.S. goods worth $34 billion, including soybeans, whiskey and electric cars. Beijing's move comes after U.S. President Donald Trump last week approved a first round of levies on about $50 billion in Chinese products and reportedly was drawing up a list for a second wave of tariffs against China.

Meanwhile, back in Europe, Merkel's fragile coalition was under pressure (https://www.wsj.com/articles/germanys-merkel-reaches-out-to-eu-members-over-immigration-dispute-1529272608?mod=searchresults&page=1&pos=2) over migrant issues, prompting increasing concerns that the government could falter. The German chancellor has been handed a two-week ultimatum (https://www.wsj.com/articles/merkel-gets-ultimatum-on-immigration-challenge-1529324605?mod=mktw) by her coalition partners to secure a deal on migrants with the country's European neighbors, a move that buys her time to settle a crisis threatening to topple her government.

What are analysts saying?

"Angela Merkel's coalition is coming under increasing strain over the migrant issue. Ms. Merkel is insisting that Germany abide by a pan-European solution while her partners are pressing for a German-only policy response," said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

"The friction is so tense that markets are becoming genuinely concerned that her government could fall," he added.

Stock movers

Shares of Indivior PLC (INDV.LN) rallied 1.6% after the U.K. pharmaceutical company said it has been successful in temporarily blocking (http://www.marketwatch.com/story/indivior-wins-temporary-block-on-suboxone-generic-2018-06-18)the launch of a generic alternative to its Suboxone opioid disorder medication through the courts.

Engie SA (ENGI.FR) dropped 4.8% after the French energy company said it expects an adjustment (http://www.marketwatch.com/story/engie-to-take-250-mln-hit-on-nuclear-revision-2018-06-18) for three nuclear units to cause a 250 million-euro ($290.1 million) hit in its 2018 earnings.

Virgin Money Holdings PLC (VM.LN) lost 2.2% after the British lender accepted a GBP1.7 billion all-share takeover offer (http://www.marketwatch.com/story/virgin-money-accepts-cybgs-17-bln-all-share-bid-2018-06-18) from CYBG PLC (CYBG.LN), the parent of British lenders Clydesdale Bank and Yorkshire Bank. Shares of CYBG were down 0.7%.

(END) Dow Jones Newswires

June 18, 2018 12:18 ET (16:18 GMT)

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