By Will Horner
U.S. stocks opened lower Friday, ending a recent rally after comments from Chinese officials suggested an uncertain course ahead for trade talks with Washington.
The Dow Jones Industrial Average fell 149 points, or 0.5%, to 25713 shortly after the opening bell. The S&P 500 dropped 0.6% and the Nasdaq Composite declined 0.7%.
In Europe, the pan-continental Stoxx Europe 600 fell 0.7% in afternoon trading, putting it on course to cap a three-session run of gains. Declines were led by auto stocks, as investors weighed the likelihood of U.S. auto-tariffs.
Chinese indexes led Asian markets lower, with the Shanghai Composite falling 2.5% and Hong Kong's Hang Seng falling 1.1%. Japan's Nikkei bucked the trend with a rise of 0.9%.
Shares of Cray rose 17% after Hewlett Packard Enterprise said it agreed to buy the supercomputer maker for $35 a share in cash in a deal valued at about $1.3 billion, net of cash. Hewlett Packard Enterprise shares added 1%.
Trade tensions also prompted a slide in the Chinese yuan, which fell 0.4% against the dollar.
Investors continued to focus on comments from Washington and Beijing on the state of trade talks after new U.S. tariffs marked a re-escalation of tensions and upended hopes the dispute was nearing a conclusion.
On Thursday, China's Commerce Ministry contradicted comments from Treasury Secretary Steven Mnuchin that U.S. negotiators will hold further talks in Beijing at "some point in the near future."
A Chinese spokesman said China "doesn't have a grasp on the U.S. side's plans to come to China for negotiations." He then said the U.S.'s escalation of tariffs had "severely hampered" talks.
"The resurgent trade war is shaking markets," said David Folkerts-Landau, Group Chief Economist at Deutsche Bank, adding that further tariffs would prompt a large market correction. "There is also the possibility of further escalation by the U.S. or a more combustible retaliation from China, either of which would further inflame tensions and elevate risks."
Investors also worried that Beijing could target U.S. tech companies in China after President Trump signed an executive order banning Chinese telecommunications firms.
"President Trump's latest executive order is more important than the current trade tussle in the medium to longer term" because of its potential impact on Chinese growth, said Geoffrey Yu, head of the U.K. Investment Office at UBS Wealth Management.
"Technological advancement and accessing more markets for its companies has been a priority strategic goal for China, but this could now be severely limited," he added.
The rising likelihood of national elections in the U.K. was also concerning European investors after Prime Minister Theresa May on Thursday set out plans for her resignation and the collapse of the bipartisan Brexit talks on Friday. Investors suspect Mrs. May's replacement would be more in favor of a disruptive exit from the European Union, something most economists warn would harm trade and the nation's economy.
U.S. government bonds were little changed, with the yield on the benchmark 10-year Treasury note at 2.373%.