LONDON: European stock markets diverged Monday after a mixed session in Asia, as trade war fears continued to hamper investor sentiment, dealers said.
In early afternoon deals, the Frankfurt, London and Paris markets posted modest gains, but Madrid and Milan stumbled lower.
An equities rally in Asia petered out on concerns about the brewing China-US trade war, while the yuan struggled to maintain momentum after the Chinese central bank moved to support the unit.
"European bourses are struggling to keep their heads above water ... as trade war fears eroded gains in Asian markets," said Fiona Cincotta, senior analyst at City Index.
"The escalating trade war between the US and China is continuing to hit Chinese stock markets and the yuan although the country's central bank stepped in Monday to support the currency.
"The trade dispute is showing no signs of abating on either side with China saying on Friday it plans to bring in tariffs on $60 billion worth of US goods.
"It could end up being a case of who can last longer in terms of taking financial damage from the rising tariffs."
Traders in Asia started the day on an upbeat note, tracking their New York and European counterparts following recent painful losses.
The gains came as data on Friday showed that while the US economy saw a slowdown in jobs creation in July, the pace of hiring remained strong over the past three months.
The report also showed wage growth remained tepid, helping ease worries about an overheating economy.
The result provided some much-needed cheer to markets, which brushed off a warning from Beijing that it would impose new tariffs if Washington pushes ahead with levies on $200 billion of Chinese imports.
However, while reports said unofficial talks have been held between Beijing and Washington, trade tensions continue to rise, with a top White House adviser calling China a bad bet and saying its economy -- the world's second biggest -- was struggling.
In forex trading, the pound dipped after International Trade Secretary Liam Fox declared over the weekend that the chances of a no-deal Brexit were now "60-40", laying the blame on EU chief negotiator Michel Barnier,
Sterling was also fighting to recover from Friday's sell-off after Bank of England boss Mark Carney warned that the chance of leaving the EU without a deal was "uncomfortably high" and "highly undesirable".
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