LONDON: European stock markets slumped on Tuesday (Jul 30) after US President Donald Trump lashed out at Beijing just as trade talks resumed, dealers said.
The British pound, meanwhile, continued its slide to fresh two-year lows as more investors were betting on a no-deal Brexit.
Trump ripped into China after US negotiators arrived in Shanghai to resurrect talks aimed at ending a year-long trade war between the world's two top economies.
"My team is negotiating with them now, but they always change the deal in the end to their benefit," Trump tweeted.
Investors reacted by pulling out of equities in anticipation of worse to come.
"President Trump sends equity markets reeling, yet again," said Stephen Innes, at SPI Asset Management.
"Whatever shred of optimism markets had about the ongoing trade negotiations were dealt a severe blow when President Trump flew off the handle again at China for not buying American agricultural products," he said.
Renewed jitters over trade compounded a cocktail worries already weighing on stocks, said Fawad Razaqzada, market analyst at Forex.com.
US markets were also lower in morning Wall Street business, but appeared more resilient than their European counterparts.
FED ANTICIPATION 'PALPABLE'
Frankfurt's benchmark DAX 30 index tumbled by more than two per cent, with German airline Lufthansa slumping after weak profits.
Paris was hurt by figures showing France's economy stagnated in the second quarter, growing by a meagre, and lower-than-forecast, 0.2 per cent.
London's FTSE 100 index, meanwhile, outperformed eurozone markets as the weak pound lifted UK-based multinationals who sell their goods abroad.
Both the US Federal Reserve and the Bank of England are slated on Thursday to announce the outcomes of their latest monetary policy gatherings. Expectations are that the Fed could deliver the first interest rate cut in a decade.
"As we get closer to the Fed decision, the sense of anticipation in markets is almost palpable," said analyst Chris Beauchamp at spread-betting firm IG.
POUND PLUMBS NEW LOWS
Meanwhile, the Brexit-hit pound continued to suffer as expectations grew of a no-deal British withdrawal from the European Union in October.
"If the intention of the government was to make the pound more competitive ahead of a no-deal Brexit, it has been stunningly effective," quipped analysts at Moneycorp.
In Asian trading, sterling sank as low as US$1.2119 - a level last seen in March 2017, before clawing back some ground.
"Prime Minister Boris Johnson said he had no intention of meeting EU leaders in person until they showed a willingness to change their position on the Irish backstop and withdrawal agreement," said CMC Markets chief analyst Michael Hewson.
"This hard line, so late in the day, appears to have prompted a sudden realisation that a no-deal Brexit has suddenly become a much more likely event."
Key figures around 1540 GMT:
London - FTSE 100: DOWN 0.5 per cent at 7,646.77 points (close)
Frankfurt - DAX 30: DOWN 2.2 per cent at 12,147.24 (close)
Paris - CAC 40: DOWN 1.6 per cent at 5,511.07 (close)
EURO STOXX 50: DOWN 1.7 per cent at 3,462.91
Pound/dollar: DOWN at US$1.2169 from US$1.2219 at 2100 GMT
Euro/pound: UP at 91.61 pence from 91.21
Euro/dollar: UP at US$1.1150 from US$1.1145
Dollar/yen: DOWN at 108.62 yen from 108.78
Tokyo - Nikkei 225: UP 0.4 per cent at 21,709.31 (close)
Hong Kong - Hang Seng: UP 0.1 per cent at 28,146.50 (close)
Shanghai - Composite: UP 0.4 per cent at 2,952.34 (close)
Brent North Sea crude: UP 37 cents at US$63.99 per barrel
West Texas Intermediate: UP 26 cents at US$57.13 per barrel