By Nathan Allen
European stocks climbed Tuesday after a downbeat session in Asia, as investors awaited a resolution to the U.S.-China trade negotiations following the recent escalation in tensions.
In the U.S., futures pointed to opening gains of 0.7% for both the S&P 500 and the Dow Jones Industrial Average, after the two indexes on Monday each shed 2.4%, their steepest one-day losses since Jan. 3.
The Stoxx Europe 600 was up 0.7% in midday trading. Germany's DAX rose 0.6% and the U.K. FTSE 100 gained around 0.9%.
In Asia, Hong Kong's Hang Seng Index closed down 1.5%, Japan's Nikkei fell 0.7% and Korea's Kospi gained 0.1%
Telecommunications firms led gains in Europe. Vodafone Group shares rose 2.4% after the company issued an optimistic outlook, offsetting weak earnings. Industrial stocks were also trading higher even after statistics showed eurozone industrial production fell for the second straight month in March, casting doubt on the sustainability of the economy's first-quarter pickup.
"As businesses in industry continue to indicate that new orders are coming in weak and production expectations are sluggish, it is likely that industrial production will come in modest at best for the spring months," said Bert Colijn, senior economist at ING.
Germany's Bayer AG was among Europe's biggest losers, trading 2.7% lower after a California jury awarded $2.06 billion to a couple who blamed the company's Roundup weedkiller for causing their cancer. Bayer's shares are down more than 45% over the past 12 months.
Volatility in global markets has surged in recent days, as the dispute between the U.S. and China intensified after a period of prolonged calm, prompting renewed concerns about global economic growth.
On Monday, Beijing hit back against an increase in U.S. tariffs with proposals to raise its own tariffs on around $60 billion of U.S. imports. President Trump responded with plans to impose a 25% levy on a further $300 billion of Chinese goods, including mobile phones and laptops, as early as this summer.
Mr. Trump didn't rule out the prospect of an accord being reached within the next few weeks, and said he was prepared to meet Chinese President Xi Jinping at the coming G-20 summit, stoking optimism for a successful outcome among some investors.
However, some analysts remained circumspect about the prospects for a speedy resolution.
"Whilst Trump's comments offered some support to market sentiment overnight, we suspect it will take more than that to repair the damage done," said London Capital Group's Head of Research Jasper Lawler in a note. "Investors will want to see concrete evidence of progress after Trump's 180-degree turn last week spooked the markets."
Kit Juckes, global strategist at Société Générale, said Tuesday's gains should be viewed as a temporary effect rather than a change in market direction.
"I wouldn't place too much faith that the current mood improvement is going to last all that long. Still, it can certainly last for a day or two," he said.
On Tuesday morning, Mr. Trump defended his strategy on Twitter, blaming China for walking out on negotiations and arguing that tariffs on Chinese imports have helped rebuild the U.S. steel industry and fueled economic growth.
However, analysts have raised concerns over the potential long-term effects that escalating duties will have on the broader economy, warning the current spat could do lasting damage to sentiment and undermine a projected economic uptick.
"If this trade war continues for a couple of months then the recovery scenario in the second half is out," BNP Paribas Fortis chief strategy officer Philippe Gijsels said.
Trade tensions have also hit the yuan, driving the currency below 6.9 to the U.S. dollar in the offshore market, its weakest level since late December.
The yield on 10-year U.S. Treasurys on Tuesday edged up to 2.415%, from 2.405% on Monday. Yields move inversely to prices. German 10-year government bonds were still in negative territory at -0.063%.
The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was flat.
In commodities, global benchmark Brent crude oil was up 0.9% on Tuesday morning at $70.86 a barrel. Gold was down 0.3% at $1,298.30 an ounce.