LONDON: Stock markets dropped Wednesday with tech firms in the firing line after China Telecom was banned from the United States, while Germany's downgrade to its growth outlook also weighed on sentiment.
Traders were largely unmoved by further record-high closes for the Dow and S&P 500 on Wall Street Tuesday.
Oil markets slid Wednesday but remained around multi-year highs on expectations about surging demand and concerns over supplies.
A strong corporate earnings season has provided some much-needed support to investors in recent weeks as companies showed resilience in the face of supply snarls, surging commodity and wage costs, as well as spiking Covid-19 cases.
But long-running friction between Washington and Beijing continues to cast a dark shadow over trading floors, with the two sides locked in a stand-off over a range of issues including Taiwan, national security, technology, trade and Hong Kong.
Also on the radar Wednesday is a UK government budget update as Britain looks to bring down its deficit which ballooned during the pandemic.
Alongside its tax and spend plans, many of which have been trailed ahead of the budget announcement around 1130 GMT, the government will update its forecasts for UK economic growth, with investors hoping for better news than out of Germany.
Europe's biggest economy is projected to expand by around 2.6 percent this year, a slower-than-expected rebound from a pandemic-induced slump last year, largely owing to bottlenecks in global supply chains, the German government said.
All eyes will be on the European Central Bank Thursday when it updates on its monetary policy amid expectations that major central banks will begin tapering their huge cash stimulus injections and raise interest rates before the end of the year as the economy recovers and inflation surges.
European stocks kick off busy week with gains
Focus was also on the tech sector after the US Federal Communications Commission cancelled the operating licence of China Telecom's US unit on Tuesday, saying it "raised significant national security and law enforcement risks".
The move came after a clampdown by former US president Donald Trump on other giants including Huawei and China Mobile.
It "seems to dampen previous hopes that the US-China relations may be turning for the better", said Jun Rong Yeap of IG Asia.
Most of the rest of Asia was also in the red as a forecast-beating jump in Australian core inflation added to broad fears about soaring global prices.
Investors are also keeping tabs on the crisis in China's property sector with several developers struggling to meet their debt obligations, while industry giant Evergrande faces a new deadline at the end of the week to avoid a default.
Key figures around 1000 GMT
London - FTSE 100: DOWN 0.3 percent at 7,256.30 points
Frankfurt - DAX: DOWN 0.4 percent at 15,698.82
Paris - CAC 40: DOWN 0.4 percent at 6,741.17
EURO STOXX 50: DOWN 0.3 percent at 4,212.40
Tokyo - Nikkei 225: FLAT at 29,098.24 (close)
Hong Kong - Hang Seng Index: DOWN 1.6 percent at 25,628.74 (close)
Shanghai - Composite: DOWN 1.0 percent at 3,562.31 (close)
New York - Dow: UP less than 0.1 percent at 35,756.88 (close)
Euro/dollar: DOWN at $1.1592 from $1.1604 at 2040 GMT
Pound/dollar: DOWN at $1.3734 from $1.3767
Euro/pound: UP at 84.43 pence from 84.26 pence
Dollar/yen: DOWN at 113.64 from 114.14 yen
Brent North Sea crude: DOWN 1.1 percent at $84.75 per barrel
West Texas Intermediate: DOWN 1.5 percent at $83.38 per barrel
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