* European shares open lower
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Tariffs to stay until there is 'Phase 2' agreement:
Mnuchin
* U.S.-China 'Phase 1' trade deal to be signed later on
Wednesday
* Bond yields inch lower; U.S. earnings in focus
(Updates prices, adds charts, detail)
By Sujata Rao
LONDON, Jan 15 (Reuters) - World stocks eased off record
highs on Wednesday and U.S. and German bond yields slipped, as
euphoria over a U.S.-China trade deal was tempered by U.S.
Treasury Secretary Steven Mnuchin saying tariffs on Chinese
goods would remain in place for now.
The 18-month trade spat should enter a quieter phase as U.S.
President Donald Trump and Chinese Vice Premier Liu He sign an
initial agreement that would boost Chinese purchases of U.S.
manufactured and agricultural goods, energy and services.
Dubbed the Phase 1 deal, it may soothe markets which have
been on edge as the conflict between the world's two largest
economies hit hundreds of billions of dollars in goods, uprooted
supply chains and slowed economic growth.
But share prices have pulled back from recent highs, with
Wall Street closing weaker on Tuesday, MSCI's index of Asian
shares outside Japan .MIAPJ0000PUS retreating from 19-month
peaks and Japan's benchmark Nikkei .N225 likewise falling
0.5%, off a four-week high.
MSCI's all-country equity index edged into the red after two
days of gains .MIWD00000PUS while all three New York indexes
are set to open weaker, futures suggested ESc1 NQc1 YMc1
The pan-European STOXX 600 index .STOXX slipped 0.1%.
The retreat was triggered by Mnuchin's comments that U.S.
tariffs on Chinese goods would stay until the completion of a
second phase of a U.S.-China trade agreement. Their eventual
removal hinged on Beijing's compliance with the Phase 1 accord,
Bloomberg reported, citing sources. The news did not entirely surprise markets, however, and
many attributed the pullback to profit-taking off the recent
rally than to any turn in underlying sentiment.
"The Phase 1 deal had pretty much been priced in so
(Mnuchin's) comments took some steam out of the market last
night and that's feeding through into today," said Justin
Onuekwusi, a portfolio manager at Legal & General Investment
Management.
The jittery mood gave a mild boost to safe-haven assets such
as gold, with the precious metal ticking up 0.3% after two days
of losses XAU= . The Japanese yen and high-grade bonds also
firmed slightly, though the yen was just a whisker off
7-1/2-month lows of 110.22 JPY=D3 .
U.S. Treasury yields ticked down, with the benchmark 10-year
note yield falling more than 2 basis points to 1.7930%
US10YT=RR , hurt also by Tuesday's data showing consumer prices
undershooting expectations in December, which could allow
interest rates to stay unchanged this year.
German 10-year yields fell 3.5 bps, extending their fall
from two-week highs DE10YT=RR after data showed the German
economy grew by 0.6% in 2019, the weakest expansion rate since
2013 and a marked cooling from the previous year
Markets are also weighing the potential impact of the U.S.
government nearing publication of a rule that would expand its
powers to block shipments to China's Huawei, as it seeks to
squeeze the blacklisted firm. "I think the Trump administration will continue to put
pressure on China in this way or some other, even after signing
a Phase 1 deal," Yuichi Kodama, chief economist at Meiji Yasuda
Life Insurance said.
Markets may also focus more on company earnings -- Refinitiv
analysis suggests S&P 500 companies' earnings-per-share fell
0.6% in the last 2019 quarter-- the second straight quarterly
decline.
But expectations from the financial sector are higher,
especially after JPMorgan posted record profits and Citi beat
estimates on Tuesday. Goldman Sachs, Bank of
America, BlackRock are among those reporting results later on
Wednesday.
"The market will see trade escalation taken off the table
but it will start to focus on earnings. We saw huge multiple
expansions in 2019 and that won't happen again until we see
earnings coming through," Onuekwusi said.
On currency markets, the trade-reliant Australian dollar
slipped 0.3% against the greenback while the euro was broadly
flat AUD=D3 EUR=EBS .
The offshore yuan CNH= weakened slightly, a day after
rising to its strongest level in six months of 6.865.
The British pound, down almost 2% this month GBP=D3 ,
slipped further as below-forecast inflation data prompted money
markets to ramp up expectations of an interest rate cut as soon
as this month.
A quarter-point cut is now fully priced by end-2020 https://tmsnrt.rs/2NmDt00
BOEWATCH
S&P 500 earnings by quarter since 2015 png https://tmsnrt.rs/2FxwJrx
Top U.S. exports to China, 2017 png https://tmsnrt.rs/2tYpR43
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