* Investors nervous ahead of U.S.-China trade talks
* China shares, yuan up gain after week-long holiday
* Turkish lira struggles on tension over Syria
* Oil gains on Iraq, Ecuador unrest
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Karin Strohecker
LONDON, Oct 8 (Reuters) - A two-day global stocks rally ran
out of steam on Tuesday while major bond yields came under
pressure and the dollar was on the back foot as concerns over
China-U.S. trade talks and disappointing European earnings
doused investors' optimism.
The pan-European STOXX 600 index .STOXX slipped 0.4%.
Germany's trade-sensitive DAX .GDAXI declined 0.5%, with data
showing an unexpected rise in industrial output, failing to lift
the index. The losses came in the wake of mixed messages on trade
tensions with Washington blacklisting eight Chinese tech
companies and President Donald Trump suggested a deal to end the
trade dispute may not yet be quite in the offing.
On Monday, U.S. and Chinese deputy trade negotiators
launched two days of talks aimed at paving the way for the first
minister-level negotiations in months on Thursday and Friday.
"We have a lot of uncertainty still around – last night,
Trump said there would only be a deal if he really got his way,
the Chinese want to exclude all the disputed topics ... some are
cautiously optimistic, other are rather sceptical," said Antje
Praefcke at Commerzbank in Frankfurt.
"We expect that we could see a mini deal with neither
Beijing nor Washington interested in letting this escalate. But
for a real deal, the positions are too far apart," she added.
Mixed corporate news added to the woes, with LSE LSE.L
shares tumbling 6% after Hong Kong pulled out of its takeover
bid for the exchange, while Germany biotech Qiagen QIA.DE has
plunged 16.5% to three-year lows after a sales warning.
MSCI's All-Country World Index .MIWD00000PUS , which tracks
shares across 47 countries, was flat on the day.
Europe's losses followed healthy gains in Asia, where
Japan's Nikkei .N225 climbed 1.0% while MSCI's broadest index
of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.55%,
led by gains in tech shares in South Korea and Taiwan.
Hong Kong .HSI extended gains after the territory's leader
said she had no plans to use the emergency regulation ordinance
to introduce other laws.
China mainland stocks .SSEC returned from a week-long
holiday with a 0.6% rise. The National Holiday celebrations also
offered a rare respite to China's retail sector, with spending
on goods and dining returning to growth this year. Yet a private survey showed China's services sector grew at
its slowest pace in seven months in September, offering little
momentum to an economy that has been expanding at its weakest
pace in almost three decades.
With the focus now turning to trade talks, Trump also said
he hoped Beijing found a humane and peaceful resolution to
political protests in Hong Kong, and warned the situation had
the potential to hurt the discussions.
Negotiations are getting under way ahead of a scheduled
increase in U.S. tariffs on $250 billion worth of Chinese goods,
to 30% from 25% on Oct. 15. Trump has said the tariff increase
will take effect if no progress is made in the negotiations.
"Since tariffs have been hurting trade, people are hoping
Trump may postpone some of the upcoming tariffs," said Yukino
Yamada, senior strategist at Daiwa Securities. "Nevertheless,
you can't ignore that fact that, up until now, the market has
underestimated Trump's determination on tariffs."
U.S. futures pointed to a softer open on Wall Street ESc1
YMc1 . On Monday, the S&P 500 .SPX had lost 0.45%, unable to
cling to gains made after positive tweets and news headlines
about the trade talks. MOMENTUM
The uncertainty also added to pressure in fixed income
markets with German bund DE10YT=RR yields nudging lower while
U.S. Treasuries US10YT=RR US2YT=RR eased ahead of some $78
billion in note and bond supply slated for auction this week.
Meanwhile in currencies, the dollar lost momentum, dipping
0.1% against a basket of its rivals .DXY after posting its
biggest single-day rise in a week in the previous session. The
greenback traded at 107.14 yen JPY= , up 0.1%.
Markets will be keenly watching comments from U.S. Federal
Reserve Chairman Jerome Powell later in the day after some weak
U.S. data last week raised concerns the U.S. economy may be
heading towards a protracted slowdown.
The euro EUR=EBS got a boost from the healthy German
industrial output data, with the single currency rising 0.2% to
$1.0989, though not far off the more than a two-year low hit
last week.
Sterling traded at $1.2290 GBP=D4 , capped by concerns that
sizeable differences between Britain and the European Union
remained for striking a Brexit withdrawal deal.
With just 24 days to go before Britain is due to leave the
EU, both sides are positioning themselves to avoid blame for a
delay or a disorderly no-deal Brexit. In emerging currency markets, the focus was on Turkey's lira
which strengthened 0.3% after hitting a five-week low in early
trade and a more than 2% tumble on Monday over concerns about
Ankara's planned incursion in northern Syria. Trump threatened to destroy Turkey's economy if Ankara took
a planned military strike in Syria too far, even though the U.S.
leader himself has opened the door for a Turkish incursion by
his decision to withdraw U.S. troop from the area. China's yuan firmed in onshore and offshore trade on its
return from the National Holiday.
Oil prices rose 0.8% as unrest in oil-producing countries
Iraq and Ecuador raised concerns of supply disruptions. Brent
crude LCOc1 futures stood at $58.83 a barrel while U.S. West
Texas Intermediate (WTI) CLc1 traded at $53.16 per barrel.