European stock markets mainly fell yesterday after a mixed session in Asia, with investor doubts growing over US-China trade talks, dealers said.

Asian equities diverged as hopes receded that China and the United States can reach a deal ending their trade war as they prepare to resume talks this week.

In Europe, Frankfurt stocks shed 0.5 per cent and Paris dropped 0.6 per cent in value in the afternoon deals.

London lost 0.7 per cent, with worst performer HSBC slumping 4.2 per cent to 635.80 pence on news that the banking titan suffered a tough fourth quarter on trade war woes.

“Global markets have failed to gain any traction today, as news of further US-China trade talks failed to inspire stocks both in Asia and Europe,” noted IG analyst Joshua Mahony.

There was “growing disillusionment over the failure to make any significant breakthrough despite a ramp up in discussions”, he said.

“However, with the top US and Chinese negotiators lined up to meet once again on Thursday, there is still some hope that we will find a positive conclusion.”

With New York closed for a public holiday on Monday there were few catalysts to drive buying, though the release of Federal Reserve minutes today will be pored over for an idea of the bank’s interest rate plans.

Top-level officials from the world’s two biggest economies will reconvene in Washington after a series of talks in Beijing last week, with the US side telling President Donald Trump they had been “very productive”.

The positive tone from the diplomats, and the president's indication he could extend a deadline for agreement, boosted regional markets Monday, extending a 2019 rally fuelled by optimism about an end to the nearly year-long tariffs spat.

Tokyo finished 0.1 per cent higher, Hong Kong shed 0.4 per cent and Shanghai closed 0.1 per cent up.

Oanda analyst Jeffrey Halley warned of trouble ahead if Chinese and US officials do not agree a deal.

“The rallies (Monday) were impressive given the talks ended last week without any concrete results and have yet to even recommence in Washington this week due to the US public holiday,” he said.

“Without sounding like a damp squib, there is now a vast amount of ‘optimism’ baked into currency, stock and energy market prices globally and precisely zero concrete detail. The unwind, should no deal be struck, could be very ugly.”

In commodities, oil prices were mixed after rallying Monday on trade talks hope and signs that Opec and other key producers are narrowing output. 

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