Stock markets, dollar drop

US Treasury Secretary Steve Mnuchin is among the high-level officials visiting China for closely watched trade talks

London (AFP) – European and Asian stock markets dropped Thursday following a sell-off in New York, while the dollar sagged as investors track top-level talks between China and the United States on trade.

The tariff spat between the world’s two biggest economies returns to the fore as a US delegation — including Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross — sit with Chinese officials in Beijing, with both sides reducing expectations of a quick resolution.

Trading floors have been swamped with worry since US President Donald Trump began this year threatening a series of tariffs on billions of dollars worth of goods, with an emphasis on China, which he claims is gaining an unfair trade advantage over the United States.

Both sides were tempering expectations for the gathering with Hua Chunying, a spokeswoman for China’s foreign ministry, telling reporters it was “not realistic to resolve all issues through only one round of negotiations”.

While China has announced tit-for-tat moves, it has also unveiled a series of measures placating the White House but there are still worries the situation could spiral into a potentially damaging trade war.

“When you think about the things that have been weighing on the market… I think the one that is really weighing the most heavily is trade and that’s why the market tends to swing the most violently on every new piece of news,” Michael Jones, chairman of RiverFront Investment Group, told Bloomberg TV.

Fresh upheaval in Washington added to the uncertainty on Wall Street as it emerged Trump’s attorney Ty Cobb on Wednesday became the latest lawyer to quit his legal team as a probe into the presidential campaign’s contacts with Russia presses on.

All three main indexes in New York ended down, despite another positive round of earnings reports, including from Apple.

The dollar meanwhile slipped, after rallying Wednesday on hopes the Federal Reserve will lift interest rates at least twice more this year. 

But the greenback is still at around three-month highs against the yen and near four-year highs against the pound.

The US central bank acknowledged an uptick in inflation while continuing to pledge further gradual increases in borrowing costs as the economy ticks along.

The positive outlook comes as other central banks — particularly the Bank of England and European Central Bank — rethink their plans for monetary tightening.

– Key figures around 1100 GMT – 

London – FTSE 100: DOWN 0.1 percent at 7,535.62 points 

Frankfurt – DAX 30: DOWN 0.2 percent at 12,774.35 

Paris – CAC 40: DOWN 0.3 percent at 5,515.45 

EURO STOXX 50: DOWN 0.3 percent at 3,543.72

Hong Kong – Hang Seng: DOWN 1.3 percent at 30,313.37 (close)

Shanghai – Composite: UP 0.6 percent at 3,100.86 (close)

Tokyo – Nikkei 225: Closed for a public holiday

New York – Dow: DOWN 0.7 percent at 23,924.98 (close)

Euro/dollar: UP at $1.1984 from $1.1944 at 2100 GMT

Pound/dollar: UP at $1.3595 from $1.3568 

Dollar/yen: DOWN at 109.49 yen from 109.91

Oil – Brent North Sea: UP one cent at $73.37 per barrel

Oil – West Texas Intermediate: UP 16 cents at $68.09