European stocks drop as US-China trade talks begin

LONDON: European stock markets fell Monday, failing to profit further from a pre-weekend Wall Street bounce that boosted Asian equities, as focus switched to US-China trade talks.

Asia caught up with strong European and US gains seen Friday after American jobs data beat forecasts and the head of the Federal Reserve hinted at a slower pace of interest rate hikes.

There was optimism also as Chinese and US officials on Monday kicked off talks to find a solution to the trade war that has seen the two sides impose tariffs on hundreds of billions of dollars worth of goods.

But in Europe, traders banked strong profits won ahead of the weekend, with no guarantee of progress in the key talks.

"There's been something of a pullback for shares across Europe ... after they ended last week with a flourish," noted David Cheetham, chief market analyst at XTB trading group.

Elsewhere on Monday, the dollar fell against its main rivals on easing rate-hike expectations, helping to push up oil that is priced in the US currency.

"All eyes have been and will remain on the US, with Friday's Fed and payrolls focus shifting onto US-China trade talks today," said Joshua Mahony, senior market analyst at IG.

"Realistically we are unlikely to see any form of tangible breakthrough in the immediate future, with issues such as the protection of intellectual property rights providing a major stumbling block that needs to be overcome."

Dealers though started the week on the front foot following a surge on Wall Street Friday that came after figures showed more than 300,000 US jobs were created in December, tempering recent concerns about growth.

Also Friday, Fed boss Jerome Powell said the bank had no "pre-set" plan for raising borrowing costs and was keeping a close watch on financial developments.

The news was music to the ears of traders, who have been fretting that the Fed would press on with its rate hike cycle, making it more expensive to borrow for investment.

The comments saw the Dow on Friday pile on more than three percent while the Nasdaq was more than four percent higher.

China's move to make it easier for banks to lend also provided support to equities, traders said.

And the positive developments offset budget gridlock on Capitol Hill that has shut down the US government, with President Donald Trump warning it could go on for years if he is not given funding to build a wall on the Mexican border.

- Key figures around 1145 GMT -

London - FTSE 100: DOWN 0.7 percent at 6,791.21 points

Frankfurt - DAX 30: DOWN 0.6 percent at 10,704.19

Paris - CAC 40: DOWN 0.6 percent at 4,710.31

EURO STOXX 50: DOWN 0.6 percent at 3,024.97

Tokyo - Nikkei 225: UP 2.4 percent at 20,038.97 (close)

Hong Kong - Hang Seng: UP 0.8 percent at 25,835.70 (close)

Shanghai - Composite: UP 0.7 percent at 2,533.09 (close)

New York - Dow: UP 3.3 percent at 23,433.16 (close)

Dollar/yen: DOWN at 108.36 yen from 108.44 yen at 2200 GMT Friday

Euro/dollar: UP at $1.1438 from $1.1398

Pound/dollar: UP at $1.2742 from $1.2730

Oil - Brent Crude: UP $1.29 at $58.35 per barrel

Oil - West Texas Intermediate: UP $1.08 at $49.04