LONDON: European stock markets mostly rose on Tuesday (Aug 27) on hopes a trade war will be avoided following the G7 summit in Biarritz, but China's yuan currency nevertheless slumped to a new 11.5-year low.
Frankfurt and Paris shares advanced solidly, though London dipped as Brexit-weary British investors - who at least took in a one-month high for sagging sterling against the dollar - played catch-up after a three-day holiday weekend.
Asian equities mainly gained, recovering from the previous day's pounding after President Donald Trump said China-US trade talks would resume soon.
Wall Street was a touch firmer as a more positive trade talk vibe took hold.
China's beleaguered yuan nosedived in morning deals to 7.1722 yuan to the dollar - a level last seen in 2008.
'STATE OF CONFUSION'
The unit had already plunged Monday on weekend news that Washington would hike tariffs on more than half-a-trillion dollars of Chinese imports, after Beijing unveiled levies on tens of billions of dollars of US goods.
"It's been a rollercoaster ride of trade war sentiment over the last few months and it seems traders have now entered into a state of confusion at where things actually currently stand," said analyst Craig Erlam at trading firm Oanda.
Erlam warned that Trump was sending out "mixed messages" after the US leader said at a G7 news conference in France that negotiations would resume very soon and Beijing had telephoned saying it wanted to strike a deal during talks which he said were "more meaningful than at any time".
'ALL THE NOISE'
"What is clear when looking past all the noise is that tariffs barriers on both sides have increased or will shortly do so, and investors need to focus on what Trump does and less on what he says," said Michael Hewson, chief market analyst at CMC Markets UK.
Capital Economics said one view of the situation was that "investors are still clinging to hopes that the US and/or China is bluffing, and that the trade war will blow over."
But the consultancy warned that "that view scarcely looks credible anymore, given how both sides have doubled down recently. Further escalation seems a much more likely outcome."
In commodities, oil prices rose after Trump said he was prepared to meet Iran's Hassan Rouhani in the next few weeks, following talks over Tehran's nuclear programme at the G7 summit.
"Expectations are ... rising that tensions in the Gulf can be de-escalated following President Macron's overtures to broker a meeting between Donald Trump and his Iranian counterpart," noted AxiTrader analyst James Hughes.
Back in Europe, talk of recession resumed after final German GDP data confirmed that the continent's top economy contracted in the second quarter, with many saying it could easily do so again in the third.
"Given that other data points for Germany in Q3 have been weak there's every chance that we see another contraction and satisfy the definition of a technical recession," said David Cheetham at XTB.
Key figures around 1545 GMT:
London - FTSE 100: DOWN 0.1 per cent at 7,089.58 points (close)
Frankfurt - DAX 30: UP 0.6 per cent at 11,730.02 (close)
Paris - CAC 40: UP 0.7 per cent at 5,387.09 (close)
EURO STOXX 50: UP 0.7 per cent at 3,370.47
Tokyo - Nikkei 225: UP 1.0 per cent at 20,456.08 (close)
Hong Kong - Hang Seng: DOWN 0.1 per cent at 25,664.07 (close)
Shanghai - Composite: UP 1.4 per cent at 2,902.19 (close)
Euro/dollar: DOWN at US$1.1092 from US$1.1102
Dollar/yen: DOWN at 105.86 yen from 106.12 yen
Pound/dollar: UP at US$1.2294 from US$1.2217
Euro/pound: DOWN at 90.26 pence from 90.87 pence
Brent North Sea crude: UP 38 cents at US$59.08 per barrel
West Texas Intermediate: UP 46 cents at US$54.10 per barrel