FRANKFURT: European shares saw their early gains evaporate, closing in the red on Wednesday, as the much-anticipated US-China trade talks offered scant details, despite promises of high-level agreements.
The pan-European STOXX 600 had risen following a cooler-than-expected US inflation report
that eased tariff-related concerns and bolstered hopes for the Federal Reserve to cut rates.
However, the index ultimately closed 0.3% lower - it’s third straight day of losses.
Meanwhile, a day after officials from Washington and Beijing agreed on a framework to restore their trade truce, President Donald Trump said the US-China deal was done, with Beijing set to supply magnets and rare earth minerals.
According to a White House official, the agreement with China allows the US to charge a 55% tariff on imported Chinese goods, including a 10% baseline “reciprocal” tariff, a 20% tariff for fentanyl trafficking and a 25% tariff reflecting pre-existing tariffs. China will charge a 10% tariff on US imports, the official said.
Investors in Europe responded cautiously, while the talks ended in a truce, analysts said investors had hoped for more substantial progress.
“Markets had a lot of hopes that folks in London were going to see some major breakthrough and essentially all it’s done is reiterate what they had a month ago,” Daniela Hathorn, senior market analyst at Capital.com.
The benchmark index, however, was still 2% shy of its February all-time high.
Europe, once a prime beneficiary of the rotation out of US assets, now finds itself gripped by a pervasive caution due to Trump’s mercurial tariff policies.
The biggest catalysts for European markets are increased defence spending and the European Central Bank cutting borrowing costs. However, ECB officials have indicated that the easing cycle will come to an end. Traders are pricing in just one more rate cut by the tail-end of this year.
“Investors piled into European markets and have taken advantage of that cheap equity market, it’s now a case of what else is going to continue to power this drive,” Hathorn added.
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