Stocks muted as investors track US-China trade talks
Global stock markets diverged on Tuesday as investors waited for the outcome of US-China talks aimed at cementing a fragile trade war truce between the world's two biggest economies.
US indices were muted, while European ones closed in mixed territory, and Asia mostly closed down, with analysts saying much was riding on the talks in London, which were in their second day.
US Commerce Secretary Howard Lutnick told Bloomberg Television that the talks were "going well" and that he expected Tuesday's discussions to last "all day".
With talks dragging on, "the lack of positive headlines weighed on stocks and the dollar," said Kathleen Brooks, research director at XTB trading platform.
Analysts said that any positive sign of agreement would fuel a rise in equities -- but that it could be restrained.
"We wouldn't bank on a big turnaround thanks to any potential trade breakthroughs," said Thomas Mathews, head analyst of Asia Pacific markets for Capital Economics.
"We doubt that the US will back off completely. That's likely to restrain any relief rally," he said.
The talks were expected to be dominated by Chinese exports of rare earth minerals used in a wide range of things including smartphones, electric vehicle batteries and green technology.
Beijing in return was looking for Washington to ease controls on its exports of sensitive electronic components.
New York shares inched a little higher in midday trade.
In Europe, Paris's CAC 40 closed slightly up but Frankfurt's Dax slipped well down.
London's FTSE 100 index closed higher after weak UK unemployment data raised the chances of the Bank of England cutting interest rates into next year, a move which often propels stock prices. It could reach a new record this week if it continues to gain.
Shares in European Union markets, in contrast, could be weakened by the conspicuous lack of any deal between Washington and Brussels before a July 9 deadline for 50-percent US tariffs to take effect. Britain has already sealed an agreement.
Brooks said the upside for the dollar -- which was weaker on Tuesday -- was limited, depending on the scope of any US-China agreement.
"For the dollar to meaningfully retrace some recent losses, we do not think that positive headlines will be enough," she said.
"A trade agreement with an actionable plan to get trade between the US and China flowing freely for the long term is the only way to stop the slide in the buck, in our view."
Investors are also awaiting key US inflation data this week, which could impact the Federal Reserve's monetary policy.
Analysts warn Trump's tariffs will refuel inflation, strengthening the argument to keep interest rates on hold instead of lowering them when the Fed meets next week.
The Fed faces pressure from the president to cut rates.
Oil prices jumped, partly from continued uncertainty about the direction of US-Iran talks on Tehran's nuclear programme.
Iran said a new round of talks was planned for Sunday, in the Omani capital Muscat -- but Trump had earlier said the meeting was expected on Thursday. Each side has drawn up proposals for the other to consider.
- Key figures at around 1545 GMT -
New York - Dow: FLAT at 42,767.94 points
New York - S&P 500: UP 0.1 percent at 6,012.15
New York - Nasdaq Composite: FLAT at 19,584.50
London - FTSE 100: UP 0.2 percent at 8,853.08 (close)
Paris - CAC 40: UP 0.2 percent at 7,804.33 (close)
Frankfurt - DAX: DOWN 0.8 percent at 23,987.56 (close)
Tokyo - Nikkei 225: UP 0.3 percent at 38,211.51 (close)
Hong Kong - Hang Seng Index: DOWN 0.1 percent at 24,162.87 (close)
Shanghai - Composite: DOWN 0.4 percent at 3,384.82 (close)
Euro/dollar: UP at $1.1423 from $1.1420 on Monday
Pound/dollar: DOWN at $1.3508 from $1.3552
Dollar/yen: DOWN at 144.90 yen 144.60 yen
Euro/pound: UP 84.57 pence from 84.27 pence
Brent North Sea Crude: UP 1.0 percent at $67.69 per barrel
West Texas Intermediate: UP 1.0 percent at $65.94 per barrel
T.Gruber--MP
