Profit-takers moved in (Daniel ROLAND)

London (AFP) – Stock markets fell Tuesday as profit-takers stepped in following a recent run higher, while a report fuelled worries about the progress of China-US trade talks.

With few major catalysts to drive business, investors were keeping tabs on developments in various issues including the US government shutdown, Brexit, and China’s stuttering economy.

“The declines witnessed across global stocks continue to highlight how fragile market sentiment remains,” said Lukman Otunuga, a research analyst at FXTM, adding geopolitical risk factors and global growth fears were “stimulating risk aversion,

European markets were up to a percent lower at the close, with Wall Street’s decline in the same ballpark by the late New York morning.

Earlier, optimism surrounding trade China-US talks was jolted by a Bloomberg News report that said the two sides were struggling to reach agreement on the crucial matter of intellectual property, which is a key source of anger in Washington.

While headlines regarding the talks earlier this month were upbeat, and eyes turn to another meeting including Beijing’s top negotiator Liu He at the end of January, the Bloomberg story, referencing unnamed sources, provided a reality check.

– China worries –

Also, China’s Xinhua news agency reported that President Xi Jinping had told top provincial leaders the Communist party “is facing long-term and complex tests in terms of maintaining long-term rule, reform and opening-up”. 

The comments suggest he is becoming worried about the effects of slowing economic growth.

“Recent signs suggest that China is struggling to sustain economic momentum, and risks of a hard landing are rising. If China falls back to Earth, we will all feel the tremor,” economists at Northern Trust said in a note.

Earlier Tuesday in Asia, Hong Kong closed down 0.7 percent, while Shanghai finished 1.2 percent lower. 

Tokyo skidded 0.5 percent, along with Sydney, while Singapore was 0.4 percent off and Seoul dropped 0.3 percent.

Concerns about the outlook led the International Monetary Fund Monday to lower its growth forecast for the global economy, citing the trade row, Brexit, and other problems.

On currency markets Tuesday, the pound gained against the dollar and the euro, extending gains after British Prime Minister Theresa May said she would try to hammer out changes to her draft Brexit deal roundly rejected by MPs last week.

– Brexit speculation –

While there is no plan in place to leave the EU on March 29, markets are confident lawmakers will avoid a damaging no-deal Brexit, with options being touted including postponing the leaving date, or calling another referendum.

The pound “has been helped by ongoing optimism that a hard Brexit will be avoided on 29th March”, said Ray Attrill, strategist at National Australia Bank.

He pointed out that MPs from both sides of the aisle had proposed a bill pushing for a delay if an agreement cannot be agreed in parliament by February 26.

“There’s a good chance this gets up. If so, it further flattens the tail risk of a hard Brexit on March 29, though note all 27 EU nations will need to agree to an extension, so it wouldn’t eliminate the risk completely,” Attrill added.

Oil prices extended Monday’s losses in response to data showing China’s economy grew last year at its slowest pace for almost three decades.

– Key figures around 1640 GMT –

London – FTSE 100: DOWN 1.0 percent at 6,901.39 points (close)

Frankfurt – DAX 30: DOWN 0.4 percent at 11,090.11 (close)

Paris – CAC 40: DOWN 0.4 percent at 4,847.53 (close) 

EURO STOXX 50: DOWN 0.6 percent at 3,106.65

New York – DOWN 0.8 percent at 24,519.04

Tokyo – Nikkei 225: DOWN 0.5 percent at 20,622.91 (close)

Hong Kong – Hang Seng: DOWN 0.7 percent at 27,005.45 (close)

Shanghai – Composite: DOWN 1.2 percent at 2,579.70 (close)

Euro/dollar: DOWN at $1.1357 from $1.1370 at 2100 GMT Monday

Pound/dollar: UP at $1.2952 from $1.2892

Dollar/yen: DOWN at 109.41 yen from 109.63

Oil – Brent Crude: DOWN $1.64 at $61.10 per barrel

Oil – West Texas Intermediate: DOWN $1.53 cents at $52.51 

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