UPDATE 2-German shares drag Europe lower as BASF profit warning bites

* BASF profit warning hits chemical, auto stocks
* Airlines stocks slip after France proposes eco-tax
* Danske Bank down on second profit warning
* Ocado gains after affirming forecast

(Updates to close, adds quote)
By Agamoni Ghosh
July 9 (Reuters) - German shares drove Europe lower on
Tuesday after a profit warning from chemicals giant BASF citing
trade friction put chemical and auto makers on the back foot,
while a slump in copper prices knocked mining stocks.
The pan-European STOXX 600 index .STOXX closed 0.5% lower
with most major indices in the red but Madrid's IBEX .IBEX
managed to outperform.
In the latest evidence of the U.S.-China trade war squeezing
businesses, BASF BASFn.DE warned that profit would fall below
forecasts for the second quarter and the full year with the
slowdown in global growth weighing on the agricultural as well
as auto sectors. The warning triggered several ratings downgrades from
brokerages and knocked shares in peers such as Bayer BAYGn.DE ,
Covestro 1COV.DE , Evonik EVKn.DE and Wacker Chemie WCHG.DE
while pushing both Europe's chemicals .SX4P and auto indexes
.SXAP over 1% lower.
"Not withstanding the softer macro, the magnitude of 2Q19
and FY19 profit warning within a span of three months shows that
the BASF business model offers no obvious benefit from being
almost everything to everybody in the sector," said JP Morgan
analysts in a note.
The basic resources .SXPP sub-sector shed over 2%, the
most in the region with miners taking a hit as copper prices
continued their recent slide on worries over waning demand from
top consumer China.
Banks .SX7P continued to suffer with Deutsche Bank
DBKGn.DE extending its losses. It posted its worst day in five
months in the prior session as investors questioned the bank's
restructuring targets and its ability to make profits after it
undertook a major overhaul. Nordic lender Danske Bank DANSKE.CO which has been
struggling to restore trust among investors after disclosing a
major money laundering scandal also weighed on the sector after
the banks cut its 2019 earnings forecast for the second time.
Airline stocks led by Ryan Air RYA.I and Air France
AIRF.PA took a beating after the French government said it
plans to introduce an eco-tax on airlines flying out of the
country.
Among the bright spots, defensive sectors such as real
estate .SX86P moved higher, while Britain's Ocado OCDO.L
rose over 5% to close at top of the STOXX 600 after the company
said it was confident about its outlook despite a 46% fall in
first-half core earnings. After a sharp sell-off in May due to an escalation in
U.S.-China trade tensions, European shares made a comeback on
hopes that major central banks around the world would adopt a
looser monetary policy.
Investors will now be watching out for Federal Reserve Chair
Jerome Powell's comments from a two-day testimony before
Congress starting Wednesday for clues about a rate cut.