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Stocks - Europe Seen Lower After Wall Street Weakens

By Peter Nurse

Investing.com - European stock markets are set to open marginally lower Wednesday, taking their tone from the small losses seen on Wall Street on Tuesday as worries emerged over the effective impact of the expected trade deal between the U.S. and China

Market participants are mindful of the still-simmering tensions between the two countries.

At 02:00 ET (0700 GMT), futures on the U.K.'s FTSE 100 index were trading 15 points, or 0.2%, lower. Futures on France's CAC 40 were 6 points, or 0.1%, lower, while the DAX futures dropped 53 points, or 0.4%.

This follows on from the broad-based S&P 500 easing back from record highs to close down 0.2% on Tuesday. The Nasdaq Composite fell 0.2% but the Dow Jones Industrial Average outperformed, helped by some strong bank earnings, closing up 0.1%.

U.S. and Chinese officials are scheduled to sign the deal Wednesday in Washington. It had been hoped that this would lead fairly promptly to a de-escalation of trade hostilities between the two economic powerhouses. But U.S. Treasury Secretary Steven Mnuchin late Tuesday dismissed the idea that this agreement could prompt the rolling back of more tariffs on China after the U.S. presidential election in late 2020.

"The tariffs will stay in place until there is a phase two. If the president gets phase two quickly, he will consider releasing tariffs. If not, there won't be any tariff relief," Mnuchin said on Bloomberg TV.

With the “phase two” negotiations likely to be more complex, this could take some time.

That said, losses were minor, helped by the largely positive tone from Wall Street's blue chips at the start of the U.S. earnings season. The banks are often taken as a rough proxy for the health of the broader economy.

JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C). were able to post strong double-digit earnings growth in the final three months of 2019, despite falling interest rates, both reporting robust consumer lending figures. JPMorgan, the biggest U.S. bank by assets, reported its most profitable year on record.

Banks will again be in focus Wednesday, with Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) due to report. Additionally, inflation data for France, Spain and the U.K. are scheduled for release, along with November industrial production and trade numbers for the EU.

Elsewhere, crude has slipped back, in line with the moves in equity markets, while gold has become more popular.

U.S. crude oil futures traded down 0.2% at $58.09 by 2:00 AM ET (0700 GMT). International benchmark Brent also fell 0.2% to $64.36. Gold futures for February delivery on New York’s COMEX rose 0.5% to $1,551.75.

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