Stock markets fell yesterday as profit-takers stepped in following a recent run higher, while a report fuelled worries about the progress of China-US trade talks.

While there were few major catalysts to drive business, investors were keeping tabs on developments in various issues including the US government shutdown, Brexit and China’s stuttering economy.

European markets were half a per cent or more lower in the mid-afternoon, a decline roughly matched by Wall Street at the opening bell.

Earlier optimism surrounding trade talks was jolted by a Bloomberg News report that said the two sides were struggling to reach agreement on the crucial matter of intellectual property, which is a key source of anger in Washington.

While headlines regarding the talks earlier this month were upbeat, and eyes turn to another meeting including Beijing’s top negotiator Liu He at the end of January, the Bloomberg story, referencing unnamed sources, provided a reality check.

Also, China’s Xinhua news agency reported that President Xi Jinping had told top provincial leaders the Communist party “is facing long-term and complex tests in terms of maintaining long-term rule, reform and opening-up”.

The comments suggest he is growing worried about the effects of slowing economic growth.

Earlier in the day, in Asia, Hong Kong closed down 0.7 per cent, while Shanghai finished 1.2 per cent lower. 

Tokyo skidded 0.5 per cent, along with Sydney while Singapore was 0.4 per cent off and Seoul dropped 0.3 per cent.

Concerns about the outlook led the International Monetary Fund on Monday to lower its growth forecasts for the global economy, citing the trade row, Brexit and other problems.

On currency markets yesterday, the pound gained against the dollar and the euro, extending gains after British Prime Minister Theresa May said she would try to hammer out changes to her Brexit deal that was roundly rejected by MPs last week. 

While there is no plan in place to leave the EU on March 29, markets are confident lawmakers will avoid a damaging no-deal Brexit, with options being touted including a delay to the leaving date and another referendum.

The pound “has been helped by ongoing optimism that a hard Brexit will be avoided on 29th March”, said Ray Attrill, strategist at National Australia Bank.

He pointed out that MPs from both sides of the aisle had proposed a Bill pushing for a delay if an agreement cannot be agreed in parliament by February 26.

Oil prices extended Monday’s losses that came in response to data showing China’s economy grew last year at its slowest pace for almost three decades.

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