LONDON: A stock market rally ran out of steam on Tuesday (Nov 19) as doubts about the chances for an early partial US-China trade deal returned, prompting a bout of profit-taking.
Market speculation is focused on the possibility of a so-called mini or 'phase one' deal, with optimists hoping it is imminent.
But sceptics have noted such a partial pact hinges on US President Donald Trump rolling back existing tariffs on China, something he appears unwilling to do.
Media reports say this stance may be a dealbreaker for China.
The optimism that earlier Tuesday lifted European and US stocks was now "waning a bit due to uncertainty regarding if the US is willing to roll back tariffs to close the deal", said analysts at Charles Schwab.
But despite Tuesday's market consolidation, underlying optimism about the trade situation remained intact.
The US and China were "now widely seen as de-escalating tensions with a phase one agreement", said David Cheetham, chief market analyst at trading group XTB.
World equities have been underpinned in recent weeks by optimism that the world's top two economies will eventually hammer out a mini trade deal as part of a wider agreement.
At the close, European stocks were mixed after giving up most or all of their earlier gains, while on Wall Street the Dow index was slightly softer in the late New York morning.
MAKING SENSE OF IT ALL
"Investors have little option but to keep pace with the rapid shifts on the US-China phase-one deal, attempting to make sense of the many comments - official and from press 'sources' - on whether a rollback was now genuinely on the table," said Stephen Innes at AxiTrader. "Ultimately they remain hostage to these developments."
Earlier, Hong Kong's main stocks index extended Monday's rally with another surge but continuing protests in parts of the city - particularly a violent standoff at a university - remained a source of worry.
The gains come as the widespread protests that hammered the city's transport network last week appear to have become less disruptive over the past two days.
Oil prices were sharply down by the end of the European trading day, as trade pessimism took hold.
"The less than promising reports coming from China on the trade war may have taken some of the energy out of the rally but oil is already trading at quite elevated levels and in a region that has previously been problematic," said Craig Erlam at Oanda.
The pound, meanwhile, retreated after strong gains on Monday seen on expectations UK Prime Minister Boris Johnson's ruling Conservative party will win next month's general election with a healthy majority, helping him to push through his Brexit deal.
Key figures around 1640 GMT:
London - FTSE 100: UP 0.2 per cent at 7,323.80 points (close)
Frankfurt - DAX 30: UP 0.1 per cent at 13,221.12 (close)
Paris - CAC 40: DOWN 0.4 per cent at 5,909.05 (close)
EURO STOXX 50: DOWN 0.2 per cent at 3,696.56
Tokyo - Nikkei 225: DOWN 0.5 per cent at 23,292.65 (close)
Hong Kong - Hang Seng: UP 1.6 per cent at 27,093.80 (close)
Shanghai - Composite: UP 0.9 per cent at 2,933.99 (close)
Euro/dollar: UP at US$1.1080 from US$1.1072 at 2100 GMT
Pound/dollar: DOWN at US$1.2934 from US$1.2953
Euro/pound: UP at 85.60 pence from 85.48 pence
Dollar/yen: DOWN at 108.51 yen from 108.68 yen
Brent North Sea crude: DOWN 1.7 per cent at US$61.37 per barrel
West Texas Intermediate: DOWN 2.3 per cent at US$55.85 per barrel