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Stocks - Europe Edges Lower; Tullow, Safran Buck Trend

By Peter Nurse - European stock markets registered small losses after the open Wednesday, taking their tone from Tuesday’s close on Wall Street, amid caution ahead of the signing of the trade deal between the U.S. and China. Confirmation of the slowest German economic growth in six years also weighed.

Market participants are mindful of the still-simmering tensions between the two countries.

At 04:15 ET (0915 GMT), the DAX dropped 20 points, or 0.2%. France's CAC 40 was 7 points, or 0.1%, lower, while the FTSE 100 in the U.K. outperformed, climbing 5 points, or 0.1%. The benchmark Euro STOXX 600, fell 1 point, or 0.1%, to 419.24.

This follows on from the broad-basedS&P 500 easing back from record highs to close down 0.2% on Tuesday. The Nasdaq Composite fell 0.2% but the Dow Jones Industrial Average outperformed, helped by some strong bank earnings, closing up 0.1%.

U.S. and Chinese officials are scheduled to sign the deal Wednesday in Washington. It had been hoped that this would lead fairly promptly to a de-escalation of trade hostilities between the two economic powerhouses. But U.S. Treasury Secretary Steven Mnuchin late Tuesday dismissed the idea that this agreement could prompt the rolling back of more tariffs on China after the U.S. presidential election in late 2020.

"The tariffs will stay in place until there is a phase two. If the president gets phase two quickly, he will consider releasing tariffs. If not, there won't be any tariff relief," Mnuchin said on Bloomberg TV.

With the “phase two” negotiations likely to be more complex, this could take some time.

That said, losses were minor, helped by the largely positive tone from Wall Street's blue chips at the start of the U.S. earnings season. The banks are often taken as a rough proxy for the health of the broader economy.

JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) were able to post strong double-digit earnings growth in the final three months of 2019, despite falling interest rates, both reporting robust consumer lending figures. JPMorgan, the biggest U.S. bank by assets, reported its most profitable year on record.

Banks will again be in focus Wednesday, with Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) due to report. Additionally, November industrial production and trade numbers for the EU are due for release.

Turning back to Europe, shares in Tullow Oil (LON:TLW) climbed 2.9% after the company reported write-offs of around $1.5 billion, citing a $10/bbl reduction in its long-term accounting oil price assumption. While never good news, this offered some hope that the worst of its share price decline is over.

Also of interest is Safran (PA:SAF), the French aerospace-component manufacturer. Its shares climb 1% after its investment case was upgraded to buy from neutral by Goldman Sachs (NYSE:GS). The bank’s analyst sees upside now after a period of underperformance.

Elsewhere, U.S. crude oil futures traded down 0.5% at $57.92 and the international benchmark Brent also fell 0.4% to $64.22. Gold futures for February delivery on New York’s COMEX rose 0.5% to $1,552.45.

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