* MSCI World flat
* European shares 0.3% higher after Monday's big falls
* U.S. tariffs on Brazil and Argentina 'effective
immediately'
* German politics keep bonds under pressure
(Releads, updates throughout, adds quotes)
By Sujata Rao
LONDON, Dec 3 (Reuters) - European shares fell back into the
red on Tuesday, abandoning earlier efforts to claw their way
back from three days of falls, as U.S. President Donald Trump
said a trade deal with China might be delayed until after
November 2020 elections.
Those comments, made as Trump landed in Britain for a NATO
summit, also sent the offshore-traded Chinese yuan to near
five-week lows CNH=D3 . France, the latest U.S. trade war
target, saw shares tumble more than 0.6% to a one-month low
.FCHI .
A pan-European equity index .STOXX , fell 0.2%, giving up
earlier modest gains and extending Monday's 1.6% tumble which
was its biggest one-day loss in two months. U.S. stock futures
also turned negative, with S&P 500 futures down 0.4% ESc1 .
Trump's willingness to open new fronts in the trade war
despite signs of economic damage has unnerved markets.
His latest comments appear to dash hopes that an agreement
with China could be reached before another round of tariff hikes
kicks in on Dec. 15, and suggests talks could in fact could drag
on for another year.
Markets had fallen sharply on Monday after Trump tweeted he
would slap tariffs on Brazil and Argentina for what he saw as
both countries' "massive devaluation of their currencies."
The United States then threatened duties of up to 100% on
French goods from champagne to handbags because of a digital
services tax that Washington says harms U.S. tech companies.
"Each step back and each step forward is just part of a slow
trend towards increased barriers to international trade," said
Jonathan Bell, CIO of Stanhope Capital.
"The market's taken an optimistic view so far this year on
the likelihood of a successful outcome to trade negotiations and
we worry ... the market may turn back to being more concerned."
Shares in some French luxury goods firms have been hit hard,
with LVMH LVMH.PA shedding almost 2% to one-month lows and
champagne maker Vranken Pommery down 0.5% VRKP.PA .
"If history is any guide the Europeans are likely to find
U.S. crosshairs start to move increasingly their way, the closer
to next year's U.S. election we get," CMC Markets told clients.
MSCI's world equity index is down for the fourth day in a
row to one-week lows .MIWD00000PUS . There were also hefty
losses across Asian bourses .MIAPJ0000PUS .N225 .AXJO
earlier in the day.
Investors are waiting for the next developments on the trade
front. China has already barred U.S. military ships and aircraft
from Hong Kong in response to U.S. support for pro-democracy
protesters in the Chinese-ruled territory. Fears that the prolonged tariff spat will snuff out any
upturn in global growth were fanned on Monday when the U.S.
Institute for Supply Management (ISM) said manufacturing had
contracted for a fourth straight month as new orders slid.
That dampened the cheer from upbeat Chinese factory surveys
as well as higher-than-expected manufacturing and inflation
readings from the euro zone. Hopes are being pinned on the U.S. consumer to keep the
economy afloat. Cyber Monday sales were expected to hit a record
following $11.6 billion in online sales during the Thanksgiving
and Black Friday shopping bonanza.
Trump's hints of trade deal delays sent bond yields tumbling
as investors dumped stocks, however, with 10-year U.S. Treasury
yields falling 5 basis points to 1.79% from the previous day's
two-week high US10YT=RR .
German bond yields meanwhile, slipped off three-week highs
DE10YT=RR but bond prices are likely to stay under pressure
amid renewed risks of early elections or a minority government
in the biggest euro zone economy. The safe-haven bid was in evidence on currency markets too,
with the yen at a one-week high to the dollar JPY=D3 . The euro
edged away from a near two-week peak versus the greenback
EUR=EBS . The dollar index slipped to a two-week low .DXY .
"This may have run its course, but there's no reason to
chase the dollar's upside from here," Daiwa Securities' foreign
exchange strategist Yukio Ishizuki said, noting that the weak
manufacturing data had forced many to cut long dollar positions.
"Trade friction remains a lingering threat, which is not
good for market sentiment."