Stock markets on both sides of the Atlantic softened Tuesday after a mixed session in Asia, with investor harbouring growing doubts over chances of success at US-China trade talks, dealers said.
As China and the United States prepare to resume talks, "we have so far learned that China is willing to decrease its trade surplus with the US by substantially increasing the amount of goods and services it purchases", said Hussein Sayed, chief market strategist at FXTM.
"This sounds like good progress, but it may not be enough to end the trade dispute," he said.
Key European stock indices were all down by mid-afternoon, with London underperforming its eurozone peers as HSBC slumped on news that the banking titan suffered a tough fourth quarter because of trade war woes.
- 'Could be ugly' -
Wall Street was also lower at the New York opening bell as market players returned to their desks following a long bank holiday weekend.
"Global markets have failed to gain any traction today, as news of further US-China trade talks failed to inspire stocks," noted IG analyst Joshua Mahony.
There was "growing disillusionment over the failure to make any significant breakthrough despite a ramp up in discussions", he said.
"However, with the top US and Chinese negotiators lined up to meet once again on Thursday, there is still some hope that we will find a positive conclusion."
Oanda analyst Jeffrey Halley warned of trouble ahead if Chinese and US officials failed to reach a deal.
"Without sounding like a damp squib, there is now a vast amount of 'optimism' baked into currency, stock and energy market prices globally and precisely zero concrete detail. The unwind, should no deal be struck, could be very ugly," he said.
In the meantime, investors will be looking to the release of Federal Reserve minutes Wednesday for clues to the direction of US interest rates, but also the pace at which the Fed is likely to reduce its bond portfolio.
- Key figures around 1430 GMT -
London - FTSE 100: DOWN 0.6 percent at 7,178.58 points
Frankfurt - DAX 30: DOWN 0.3 percent at 11,267.05
Paris - CAC 40: DOWN 0.4 percent at 5,138.31
EURO STOXX 50: DOWN 0.5 percent at 3,229.02
New York - DOWN 0.2 percent at 25,842.19
Tokyo - Nikkei 225: UP 0.1 percent at 21,302.65 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 28,228.13 (close)
Shanghai - Composite: UP 0.1 percent at 2,755.65 (close)
Euro/dollar: UP at $1.1313 from $1.1311 at 2200 GMT Monday
Pound/dollar: UP at $1.2964 from $1.2924
Dollar/yen: UP at 110.59 yen from 110.62 yen
Oil - Brent Crude: DOWN 72 cents at $65.78 per barrel
Oil - West Texas Intermediate: DOWN 15 cents at $55.82