The new round in the bruising trade war between Washington and Beijing caused a sudden trend reversal in European markets which had been showing solid gains in the morning.

Wall Street, which had been expected to open higher, also came off to a weaker start.

US stocks were "decisively lower", said analysts at Charles Schwab, "with the threat of new tariffs on $75 billion of US goods by China causing trade fears to ramp up".

Trade blues even overshadowed excited anticipation ahead of a key speech by Federal Reserve boss Jerome Powell, which will be parsed for clues about the US central bank's plans for monetary policy.

- 'Dangerous assumption' -

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There are hopes Powell will outline further cuts to borrowing costs, having done so last month for the first time since the financial crisis, but with the US economy in much better health than most others, analysts warn there could be some disappointment.

"One thing to reiterate going into tonight's speech is that markets seem very clearly positioned for some very dovish guidance from Mr Powell on US interest rates," said Jeffrey Halley, senior market analyst at OANDA.

"It is a dangerous assumption to make and the corrections across various asset classes if he disappoints could make for a very emotional finish to the week's trading session."

Traders were also digesting another inversion of the US yield curve Thursday, when the return on 10-year notes fell below that of two-year notes, which is seen as a sign of a possible recession.

"The yield curve is talking to you ... and it's not saying anything nice," said ING senior rates strategist Antoine Bouvet.

In foreign exchange, the pound retreated against the dollar one day after spiking on hopes that Britain would exit the European Union with a deal.

"As investors start to eye the central bank shindig in Jackson Hole, the pound decided to rein in the enthusiasm it displayed on Thursday," said Connor Campbell, analyst at Spreadex.

- Key figures around 1335 GMT -

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London - FTSE 100: UP 0.2 percent at 7,144.75 points

Frankfurt - DAX 30: FLAT at 11,742.05

Paris - CAC 40: DOWN 0.1 percent at 5,384.94

EURO STOXX 50: FLAT at 3,372.42

New York - Dow: DOWN 0.4 percent at 26,137.05

Tokyo - Nikkei 225: UP 0.4 percent at 20,710.91 (close)

Hong Kong - Hang Seng: UP 0.5 percent at 26,179.33 (close)

Shanghai - Composite: UP 0.5 percent at 2,897.43 (close)

Pound/dollar: DOWN at $1.2205 from $1.2253 at 2040 GMT

Euro/dollar: DOWN at $1.1070 from $1.1086

Euro/pound: DOWN at 90.40 pence from 90.44 pence

Dollar/yen: UP at 106.43 yen from 106.42 yen

Brent North Sea crude: DOWN 99 cents at $58.93 per barrel

West Texas Intermediate: DOWN $1.40 at $53.95 per barrel