European shares drop as doubts grow about U.S.-China trade truce
European shares opened in negative territory on Tuesday as investors started to question whether the truce agreed by the United States and China on their trade dispute would lead to long-term deal.
After enjoying a rally for its first day of trading in December, Germany's DAX – the most sensitive to China and trade war fears – was down 0.4 percent at 0814 GMT.
The pan-European STOXX 600 fell 0.1 percent.
"The number one driver for global risk sentiment is the U.S.-China trade talks, which suddenly don't look as promising as they did over the weekend," wrote Commerzbank rates strategist Christoph Rieger.
The European automotive sector, which is most sensitive to trade war fears, was the worst performing one, down 1.2 percent.
Adding to the weak sentiment, the yield curve between U.S. three-year and five-year notes and between two-year and five-year inverted on Monday, a first since the financial crisis, excluding very short-dated debt.
Analysts now fear an inversion of the two-year, 10-year yield curve could be imminent and point towards a possible U.S. recession.
"Recessionary fear is starting to raise its ugly head," wrote Stephen Innes at broker Oanda.
France's JCDecaux posted one of the worst individual falls, down about 6 percent after Exane BNP Paribas reinitiated its coverage of the stock with an "underperform" rating. (Julien Ponthus and Abhinav Ramnarayan,)
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