Stocks guardedly optimistic on US-China trade sentiment

July 2: Equity investors gave a guarded welcome on Tuesday to a resumption of US-China trade talks, but fretted over weaker global economic data, traders said.

In Europe, the French blue-chip CAC 40 index and Frankfurt's DAX 30 were slightly higher at the close, as London's FTSE index outperformed the pack thanks to a weaker pound boosting exporters.

Across the Atlantic, Wall Street opened almost unchanged, but subsequently fell into mildly negative territory.

"Sentiment appears a bit cautious following the release of disappointing global data and after the US threatened new tariffs on the EU," said Forex.com analyst Fawad Razaqzada.

"But with G20 and OPEC meetings behind us, the focus is turning back to economic data for market participants."

Financial markets had taken cheer on Monday after US President Donald Trump and his Chinese counterpart Xi Jinping agreed to kick-start trade negotiations, but key questions remained unresolved, including on tech trade and intellectual property.

Trump's notorious unpredictability also made investors more reluctant to place their bets, analysts said.

- Hanging by a tweet -

"The US and China are going to enter a new phase of negotiations," said Tangi Le Liboux, a strategist at the Aurel BGC brokerage in Paris.

"We will have to see over coming weeks whether there is real progress in these talks. Don't forget that Donald Trump can put a question mark over everything with just a single tweet."

Among the weaker macroeconomic data, US manufacturing hit a 32-month low amid weakening demand, Germany's key machine-tool sector sharply downgraded its forecast for this year in the face of Brexit and the US-China trade conflict, and British construction activity contracted at its fastest rate in a decade.

Observers suggested such weak data could put further pressure on central banks to provide support to economies with fresh stimulus.

Australia's central bank on Tuesday lowered the cost of borrowing for the second-straight month, bringing interest rates to a new historic low.

In the US, the Federal Reserve is widely tipped to cut interest rates at its next policy meeting this month. The release of a US jobs report Friday will be closely followed as a weak reading could boost the case for a big reduction.

- Oil slides despite OPEC -

In the eurozone, however, policymakers at the European Central Bank do not see the need to rush into a rate cut, Bloomberg reported.

"Stocks may see the next catalysts stem from deteriorating economic data that will support the arguments for the Fed to deliver a stronger commitment to easing and for the other major central banks to step up their efforts," said OANDA market analyst Edward Moya.

Oil retreated by more than three percent from Monday when OPEC agreed to extend by nine months output cuts aimed at supporting prices and soaking up excess supplies, following last weekend's G20 pact between cartel kingpin Saudi Arabia and non-member Russia.

"With trade tensions likely to extend well into 2020, the calculus would appear to be that lower production levels would do little to exert further upward pressure on prices," said Michael Hewson at CMC Markets.

- Key figures around 1540 GMT -

• New York - Dow: DOWN 0.2 percent at 26,676.13 points
• London - FTSE 100: UP 0.8 percent at 7,559.19 (close)
• Paris - CAC 40: UP 0.2 percent at 5,576.82 (close)
• Frankfurt - DAX 30: UP less than 0.1 percent at 12,526.72 (close)
• EURO STOXX 50: UP 0.3 percent at 3,507.98
• Tokyo - Nikkei 225: UP 0.1 percent at 21,754.27 (close)
• Hong Kong - Hang Seng: UP 1.2 percent at 28,875.56 (close)
• Shanghai - Composite: FLAT at 3,043.94 (close)
• Euro/dollar: UP at $1.1297 from $1.1283 at 2050 GMT
• Dollar/yen: DOWN at 108.06 yen from 108.44
• Pound/dollar: DOWN at $1.2596 from $1.2637
• Brent North Sea crude: DOWN $2.07 at $62.99 per barrel
• West Texas Intermediate: DOWN $2.20 at $56.89 per barrel

AFP/APP