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European Shares Seen Lower Amid Trade Fears

marketopen 011519 21may20 lt

European stocks look set to open lower on Thursday as U.S.-China tensions continue to simmer and weak data from Japan rekindled concerns about a deep economic slump.

The U.S. Senate overwhelmingly approved legislation Wednesday that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on American stock exchanges amid increasingly tense relations between the world's two largest economies.

In a series of tweets on Wednesday night, President Donald Trump escalated his rhetoric against China, saying the country's leader, Xi Jinping, is behind a "disinformation and propaganda attack on the United States and Europe."

The U.S. State Department has approved the possible sale of 18 MK-48 Mod6 Advanced Technology Heavy Weight Torpedoes to Taiwan valued at approximately $180 million, a move that could further strain Washington's already tense relationship with Beijing.

U.S. Secretary of State Mike Pompeo has praised Taiwan's response to the coronavirus pandemic and called the country a reliable partner in a statement.

A day earlier, he had condemned the exclusion of Taiwan from the World Health Organization's annual meeting, saying it proved U.S. charges that the UN body was under the Chinese Communist Party's thumb.

China's foreign ministry said that Pompeo has severely damaged the peace and stability of the Taiwan Strait and China-U.S. relations by making a congratulatory statement to Taiwan's president Tsai Ing-Wen.

"The Chinese side will take necessary countermeasures to respond to the above-mentioned erroneous actions by the U.S. side. And the U.S. side should bear the consequences arising therefrom," the ministry said.

Meanwhile, trade tensions between Australia and China have escalated again after Beijing imposed new customs inspection procedures on iron ore imports.

Asian markets are trading mixed after data showed recession-hit Japan's exports plunged nearly 22 percent in April, the country's worst drop in more than a decade.

The 19th National Congress of the Communist Party of China meets this week, with investors looking for details of possible new steps by Beijing to stimulate its virus-battered economy.

The dollar ticked higher and oil rose to extend overnight gains on hopes of a rapid economic recovery and government support, while gold edged lower to snap a two-day winning streak.

Flash Purchasing Mangers' survey results from euro area and the U.K. are due later in the session, headlining a busy day for the European economic news.

Across the Atlantic, the Labor Department's weekly jobless claims report is likely to attract attention, potentially overshadowing reports on Philadelphia-area manufacturing activity, existing home sales, and leading economic indicators.

U.S. stocks posted strong gains overnight on optimism about an economic recovery as all 50 states relaxed some of their coronavirus restrictions.

Investors also parsed the minutes from the most recent Federal Reserve meeting in April, encouraging earnings news from home improvement retailer Lowe's and a report raising doubts about Moderna's potential coronavirus vaccine.

The Dow Jones Industrial Average rallied 1.5 percent, the tech-heavy Nasdaq Composite jumped 2.1 percent to reach its best closing level in three months and the S&P 500 surged 1.7 percent.

European markets recovered from an early slide to end higher on Wednesday despite reports about divisions in the EU regarding the Recovery Fund.

The pan European Stoxx 600 gained 1 percent. The German DAX rose 1.3 percent, France's CAC 40 index added 0.9 percent and the U.K.'s FTSE 100 climbed 1.1 percent.

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