European stocks slip on fresh US-China fears

European stocks fell to their lowest levels in more than two weeks on Wednesday as fresh concerns over relations between the US and China emerged.

The US Senate has passed a bill that would force the Trump administration to annually re-examine Hong Kong’s special status on Tuesday, infuriating Beijing as protests continue to roil the Asian financial centre.

The president also threatened to raise tariffs on Chinese goods if he is unable to strike a trade deal with Beijing.

European markets slipped, with the composite Stoxx Europe 600 declining for a third straight session with a fall of 0.6 per cent. Major bourses in London, Frankfurt and Paris were down by similar margins.

Investors worry the Senate’s actions against China might prevent a trade deal, said UBS’s Paul Donovan.

“However, risk market declines have been fairly limited, suggesting that investors’ base case is that a deal will still take place.”

In New York, futures trade pointed to moderate declines at the open, while in Asia there were falls for China’s CSI 300, Hong Kong’s beleaguered Hang Seng and Japan’s Topix.

Later in the US session, investors will weigh the release of the latest minutes from the Federal Reserve’s monetary policy committee.

The minutes “will probably signal that policy is on hold for now, barring a material reassessment in the outlook, per Chair Powell’s recent rhetoric,” said Deutsche Bank’s strategists.

“It’ll be interesting to see if the minutes shed any light on what exactly would qualify as a ‘material reassessment’, as well as details on how deep the internal disagreement over the rate cut was.”

In government bond markets, the benchmark US 10-year Treasury fell four basis points as investors moved into the debt. There were similar moves in German, British and Japanese sovereign debt.

The pound slipped 0.1 per cent against the US dollar to hover around the $1.29 level, which little fallout from the UK’s first election TV debate.

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