European stocks close week lower on Trump's EU, Apple tariff threats

Trump threatens 25% tariff on non-US made iPhones

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German stocks fall from near record levels

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Bond yields slip after run-up

May 23 (Reuters) - European shares closed sharply lower on Friday after U.S. President Donald Trump ramped up threats of tariffs on the European Union and smartphone giant Apple, reigniting fears of a damaging global trade war.

Trump said he is recommending a straight 50% tariff on goods from the EU starting on June 1, which would result in stiff levies on luxury items, pharmaceuticals and other goods. He also threatened Apple with a 25% tariff on any iPhones sold, but not manufactured, in the United States.

"This latest move threatens a full-scale escalation of the global trade war. European markets will suffer, undoing some of the strong momentum we have seen in recent months," Lindsay James, investment strategist at Quilter, said.

"What happens next is anyone's guess, but it is unlikely the EU simply rolls over following this latest development."

The pan-European STOXX 600 index closed 0.9% lower, and marked a weekly decline, its first in six. The index logged its biggest one-day fall since April 9.

A gauge of euro zone stocks took a sharper 1.5% hit, with declines on London's FTSE 100 contained, as the country clinched a trade deal with the U.S. earlier this month.

The Euro STOXX Volatility index spiked to its highest in more than three weeks.

The STOXX 600 had recovered from its early April slump after trade deals between the U.S. and some trading partners had calmed worries over trade tensions.

On Friday, automobiles and parts, expected to take the biggest hit from tariffs, led broader declines with a 3.1% fall. Economically-sensitive banks shed 1.8%, while an index of luxury goods dropped 2.7% as they are highly exposed to the U.S. market.

Germany's DAX fell 1.5% after coming within spitting distance of a record high earlier in the day when data had shown that the country's economy grew significantly more in the first quarter than previously estimated.

Indexes in France, Spain and Italy, were down more than 1% each.

The benchmark 10-year European government bond yield dropped along with its U.S. counterpart on raised concerns about slowing economic growth.

Traders bet on more interest rate cuts from the European Central Bank, expecting the deposit rate to reach 1.60% by December from 1.72% before Trump's comments.

British investment platform AJ Bell jumped 8.4% after it posted a 12% year-over-year rise in half-yearly profit before tax, benefiting from increased client activity. (Reporting by Sruthi Shankar, Purvi Agarwal and Ragini Mathur in Bengaluru; Editing by Nivedita Bhattacharjee, Mrigank Dhaniwala, Leroy Leo and Andrew Heavens)

AJ Bell

Apple