European and US stock markets retreated yesterday, with the biggest declines in share prices seen in Frankfurt following a profit-warning from German chemicals giant BASF.

Asian indices mostly closed down as investors awaited the start of testimony from US Federal Reserve head Jerome Powell.

Clues on the outlook for US interest rates are keenly awaited after the country’s recent strong jobs report threw into doubt expectations for a deep cut in American borrowing costs later this month to help boost the economy.

“Equities are weaker and the dollar firmer as the prospect of the Fed not being as dovish as the market wants it to be takes the shine off things,” said Neil Wilson, analyst for Markets.com.

Frankfurt was down a hefty 1.1 per cent in afternoon trading, while London slid 0.3 per cent and Paris shed 0.4 per cent compared with the closing levels on Monday.

Wall Street opened lower, with the Dow dropping 0.5 per cent in the first minute of trading. The euro and pound dropped versus the dollar, while oil prices rose.

Shares in BASF slumped over six per cent after the company slashed its earnings forecast for the full year, blaming the impact of trade conflicts on the industry, before clawing back some of the decline.

Shares in Deutsche Bank, Germany’s embattled biggest lender, continued to decline, as analysts said the jury was still out on the massive restructuring announced at the weekend.

Deutsche Bank stock was down 3.8 per cent in late trading, also among the worst performers on Frankfurt’s DAX index of blue-chip companies.

Topping London’s FTSE 100 index, meanwhile, was UK online supermarket Ocado, whose shares jumped 6.8 per cent after the company posted strong revenues.