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STOXX 600 on course to confirm correction

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German industrial orders stagnate, hinting at slow

recovery

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Gerresheimer drops after KKR exits takeover talks

(Updates after China's retaliatory tariffs)

By Sukriti Gupta and Medha Singh

April 4 (Reuters) - European shares slumped on Friday as

China hit back with steep tariffs days after U.S. President

Donald Trump announced sweeping levies, intensifying fears of a

global recession triggered by the trade war.

The pan-European STOXX index fell 5.2% at 1131 GMT,

dropping about 12% from its March 3 all-time closing high, on

course to confirm the benchmark is in correction territory.

Germany's DAX and the euro zone blue-chip index

were also on correction course, dropping 5.7% and

5%, respectively, on Friday. Among regional markets, Italy

shed 7.8%, Spain declined 6.3% and France

fell 4.7%.

A gauge of euro zone stock market volatility rose

11.5 points to 37, its biggest one-day spike in 3-1/2 years.

China announced a slew of countermeasures against tariffs

imposed by Trump, including additional tariffs of 34% on all

U.S. goods and curbs on export of some rare earths, deepening an

escalating trade war. The Chinese finance ministry said the

additional tariffs would be imposed from April 10.

"China comes out swinging with an aggressive response ...

this is significant and is unlikely to be over," said Stephane

Ekolo, market & equity strategist at Tradition in London.

The tit-for-tat tariffs mark a sharp escalation in the

global trade war that threatens to raise prices, upend supply

chains and squeeze corporate profit margins, putting the STOXX

600 on course for its sharpest weekly decline since March 2020.

France, working along with the European Union, is likely to

issue reciprocal responses to U.S. tariff measures on the EU

initially in mid-April and then again in late April, France's

government spokesperson said on Thursday.

Europe was hit with a 20% effective U.S. tariff rate this

week, prompting traders to increase bets on interest rate cuts

from the European Central Bank to shore up economic growth.

Traders now see a 90% chance of a quarter-point rate cut

from the ECB later this month, alongside two more reductions

widely expected before 2025 ends.

European banks racked up the most losses among

sectors, down 15% in two sessions, marking their steepest falls

since June 2016.

The luxury sector, which heavily relies on China for sales,

also faltered as France's LVMH lost 2.8%, while

Gucci-owner Kering, Hermes and Richemont

fell between 3.4% and 7.5%.

Pharma companies Novartis, Roche and Novo

Nordisk also weighed heavily on the index.

Data on Friday showed German industrial orders stagnated in

February and the January data were upwardly revised, showing

that the country's industrial sector could have bottomed out but

the recovery may be slow.

Among stocks, Gerresheimer slumped 16.8% after a

report said KKR has abandoned a private equity

consortium discussing a takeover of the German speciality

packaging maker.

Kinnevik climbed 2.3% after the nomination

committee proposed that Cristina Stenbeck return as the chair of

the Swedish investment company after nine years.

Investors await a crucial March U.S. jobs report, due at

1230 GMT, to gauge the health of the world's biggest economy.