UPDATE 2-European stocks drop on trade, Brexit anxiety; Qiagen tumbles 21%

(For a live blog on European stocks, type LIVE/ in an Eikon
news window)
* U.S. includes some Chinese AI firms in blacklist
* Pound gets hammered on signals of hard Brexit
* German industrial production rises unexpectedly in Aug
* LSE tumbles as Hong Kong bourse drops bid
* Airbus rises after Q4 deliveries target

(Adds fresh comment, updates prices)
By Susan Mathew
Oct 8 (Reuters) - European shares fell on Tuesday as an
escalation in U.S.-China trade tensions and Brexit worries along
with disappointing corporate news dented sentiment.
The U.S. government widened its trade blacklist to include
some of China's top artificial intelligence (AI) startups on
Tuesday, and a South China Morning Post report said China had
toned down its expectations ahead of high-level talks between
Washington and Beijing this week.
"Coming just two days ahead of those trade talks it
essentially makes one think we're going to be back in situation
where we see trade talks breakdown," said Joshua Mahony, a
senior market analyst at IG Group.
"(The AI blacklist) is a strategic move from the U.S. and
its likely to get some sort of retaliation from China."
The pan-European STOXX 600 index .STOXX ended down 1.1%.
Qiagen's QIA.DE 21% tumble led losses after the biotech
company said its chief executive would step down and warned on
third-quarter preliminary sales. All major sectors in Europe were in the red, and while most
of the big markets in the region slid more than 1%, losses in
London's FTSE 100 .FTSE were limited to 0.8% as its exporters
benefited from a battered pound. GBP/
The currency lost 0.7% after a Downing Street source said
German Chancellor Angela Merkel and British Prime Minister Boris
Johnson had spoken and that she had made clear a deal was
"overwhelmingly unlikely". Investors are waiting to know if this is the official
response from the European Union to prepare for a hard Brexit,
said IG's Mahony.
"Auto sales have been hit particularly hard by a lack of
demand from the UK, so certainly the German economy has felt the
uncertainty around Brexit."
Germany's export-reliant DAX .GDAXI fell 1.1%, with an
unexpected rise in August industrial output providing little
relief from fears of the economy slipping into recession.
Among stocks, some weak forecast and takeover concerns
weighed on the biggest decliners. Shares of London Stock
Exchange Group LSE.L dropped 5.8% after Hong Kong's bourse
0388.HK withdrew its $39 billion bid.
Energy firm Uniper UN01.DE slumped 8.5% as Finnish utility
Fortum FORTUM.HE got closer to full ownership of the German
firm, a move Uniper's top management had warned could threaten
the firm's credit rating. Profit-taking got the best of British airline easyJet
EZJ.L with some brokers also disappointed by a lack of
positivity in the company's outlook. The carrier's 7.5% slide
dragged Europe's travel and leisure sector .SXTP down 1.8%,
the biggest decline among major sectors. At the other end, shares of Airbus AIR.PA rose 0.4% after
the planemaker reported higher orders for the first nine months
of the year, putting it well ahead of U.S. rival Boeing BA.N .
Boeing's sales have been hampered by the grounding of its
fast-selling jet, the 737 MAX, in the wake of two accidents in
Indonesia and Ethiopia. Nordic telecom companies Nokia Oyj NOKIA.HE and Ericsson
ERICb.ST rose after a report said the U.S. government had
suggested issuing credit to help compete with China's Huawei.