Global Stocks Mostly Down On Trade War, Brexit Worries

Donald Trump has said he would prefer to hammer out a broad trade deal with China, though reports say Beijing has narrowed the number of areas it is willing to discuss AFP / Andrew CABALLERO-REYNOLDS

European and US stocks took a beating Tuesday on dimming hopes for a US-China trade accord and as talks between Britain and Europe over Brexit teetered on the brink of collapse.

US markets were in the red the entire session after the Commerce Department late Monday announced new restrictions on 28 Chinese entities over human rights violations, drawing an angry rebuttal from Beijing.

Stocks took another drop during the afternoon after the US State Department announced new visa restrictions Chinese government and Communist Party officials alleged to have persecuted Muslims.

Besides the new US sanctions, there also were fresh reports citing unnamed Trump administration officials saying the White House is mulling new measures to curtail US investment in China.

"It's not a good sign to see these type of measures being put in place just before the trade negotiation resumes," said Tom Cahill of Ventura Wealth Management.

"The market is skeptical that anything good can come out of the negotiations this week."

Major US indices slid more than one percent, with the S&P 500 skidding 1.6 percent to 2,893.06.

European bourses also tumbled along with the British pound as a no-deal Brexit again seemed more likely following the latest clash between EU and British leaders on the divorce agreement.

The British pound tumbled after German Chancellor Angela Merkel was reported as saying a Brexit deal with London was "overwhelmingly unlikely." dpa / Patrick Seeger

Brexit talks teetering

In an unusual move, Downing Street provided a readout of a meeting between British Prime Minister Boris Johnson and German chancellor Angela Merkel in which Merkel allegedly demanded a rewrite of Britain's approach to the long-vexing Irish border problem that made a compromise "essentially impossible."

The Downing Street official quoted Merkel as saying a deal now looked "overwhelmingly unlikely" and added that the Brexit talks were "close to breaking down."

Merkel's office declined to comment on confidential discussions, but European Council President Donald Tusk addressed Johnson caustically on Twitter.

"What's at stake is not winning some stupid blame game," Tusk said.

The odds of a no-deal Brexit appeared higher following contentious talks between German Chancellor Angela Merkel and British Prime Minister Boris Johnson, who are shown here in August AFP / Odd ANDERSEN

"At stake is the future of Europe and the UK as well as the security and interests of our people. You don't want a deal, you don't want an extension, you don't want to revoke, quo vadis?"

The impasse weighed on the pound, which was at $1.2213 and could fall further, analysts warned.

"This public antagonism is a sign that negotiations are not going well," said Kathy Lien of BK Asset Management. "Unless Johnson proceeds with a request to delay Brexit, the next stop for GBP/USD could be 1.20."