Storm clouds are gathering across global markets as investors grow increasingly concerned China and the US are heading for a trade war (Anthony WALLACE)

London (AFP) – European stock markets fell further Wednesday but losses were less sharp than during the previous session as traders sized up the prospect of a US-China trade deal being struck this week.

Europe was helped in part by official data showing industrial production in Germany, Europe’s largest economy, ticked up in March.

Asian equities closed sharply lower on Wednesday, playing catch-up with heavy losses on Wall Street and across Europe on Tuesday.

The dollar traded mixed against main rivals.

“The prospect of higher import tariffs being levied on Chinese goods by the Trump administration from the end of this week continues to blight market sentiment as failure to reach an accord will serve up a fresh blow for global trade,” noted James Hughes, chief market analyst at AxiTrader.

“The fact this could be little more than a bargaining gambit cannot be ignored however so developments in the coming days could see volatility maintained.”

After months of healthy gains across stock markets this year, Trump’s threat to hike tariffs on $200 billion of Chinese imports from Friday caused shockwaves and rekindled the spectre of a trade war between the planet’s two biggest economies.

And while Beijing insisted it would still send its top negotiator to planned talks in the US on Thursday and Friday, observers said confidence has been shattered, with uncertainty reigning ahead of the high-stakes meeting.

“The two largest economic powerhouses, the US and China, either will be at a trade war or a trade peace and in reality there’s only a couple of people who know the answer to that and it isn’t those of us on Wall Street,” said Larry Robbins, CEO of Glenview Capital Management.

“It’s to be expected that there’s some volatility into this critical week,” he told Bloomberg TV.

Asian markets staged a minor recovery Tuesday following the previous day’s pummelling, which came in response to Trump’s warning. But a blowout on Wall Street overnight sent Asia slumping once more Wednesday.

Oil prices meanwhile fell, with observers predicting a rough near-term for crude futures with supply gaps from Venezuela and Iran having been filled.

Additionally there is concern that OPEC and Russia may not extend their production caps past next month, despite US output and stockpiles rising.

 – Key figures around 1045 GMT – 

London – FTSE 100: DOWN 0.3 percent at 7,239.83 points  

Frankfurt – DAX 30: DOWN 0.2 percent at 12,071.52 

Paris – CAC 40: DOWN 0.2 percent at 5,384.44

EURO STOXX 50: DOWN 0.3 percent at 3,392.05

Tokyo – Nikkei 225: DOWN 1.5 percent at 21,602.59 (close)

Hong Kong – Hang Seng: DOWN 1.2 percent at 29,003.20 (close)

Shanghai – Composite: DOWN 1.1 percent at 2,893.76 (close)

New York – Dow: DOWN 1.8 percent at 25,965.09 (close)

Euro/dollar: UP at $1.1193 from $1.1192 at 2100 GMT

Pound/dollar: DOWN at $1.3006 from $1.3072 

Dollar/yen: DOWN at 110.01 yen from 110.26 yen

Oil – Brent Crude: DOWN 50 cents at $69.38 per barrel

Oil – West Texas Intermediate: DOWN 20 cents at $61.20 per barrel

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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.