Volkswacht Bodensee - Stock markets diverge as traders eye possible Trump-Xi talks

After a period of relative calm on tariffs, US President Donald Trump accused Beijing at the weekend of violating last month's deal to slash huge tit-for-tat levies and threatened to double tolls on steel and aluminium.

"Trade tensions threatened a sharp sell-off on Monday, before news that President Trump and President Xi (Jinping) would speak on the phone helped to ease fears," noted Kathleen Brooks, research director at XTB.

"However, there is a risk-off tone... after news that the Dutch governing coalition had collapsed, along with signs of weakness in the world’s two largest economies."

Hong Kong and Shanghai stock markets closed higher on Tuesday, while Europe's top indices mostly steadied in midday deals.

Far-right Dutch leader Geert Wilders withdrew his party from the government on Tuesday in a row over immigration, bringing down a shaky coalition and likely ushering in snap elections.

The withdrawal opens up a period of political uncertainty in the Netherlands -- the European Union's fifth-largest economy and major exporter -- as far-right parties make gains across the continent.

The Netherlands is part of the eurozone and official data on Tuesday showed the area's inflation eased in May to its lowest level in eight months, back below the European Central Bank's two-percent target.

The ECB had already been widely expected to cut eurozone interest rates this week, putting pressure on the euro.

The main Euronext Amsterdam stocks index was down 0.3 percent.

Elsewhere, oil prices inched higher following Monday's surge. That came after OPEC+ hiked output less than expected and a Ukrainian strike on Russian bombers parked deep inside the country stoked geopolitical concerns.

- Growth downgrade -

Focus was firmly on the United States and China.

Officials from both sides are set for talks on the sidelines of an Organisation for Economic Co-operation and Development ministerial meeting in Paris on Wednesday.

The OECD on Tuesday slashed its 2025 growth outlook for the global economy to 2.9 percent from 3.1 percent previously expected.

It also said the US economy would expand 1.6 percent, down from an earlier estimate of 2.2 percent.

The organisation noted that "substantial increases" in trade barriers, tighter financial conditions, weaker business and consumer confidence, as well as heightened policy uncertainty will all have "marked adverse effects on growth" if they persist.

"For everyone, including the United States, the best option is that countries sit down and get an agreement," OECD chief economist Alvaro Pereira told AFP.

Data on Tuesday indicated Chinese factory activity shrinking at its fastest pace since September 2022.

Wall Street saw tech-led gains on Monday in the wake of forecast-beating earnings from chip titan Nvidia.

US Commerce Secretary Howard Lutnick voiced optimism on Monday over a trade deal with India "in the not too distant future".

Also in focus was Trump's signature "big, beautiful bill". It is headlined by tax cuts slated to add up to $3.0 trillion to the nation's debt at a time of heightened worries over the country's finances.

US senators have started what is certain to be fierce debate over the policy package, which partially covers an extension of Trump's 2017 tax relief through budget cuts projected to strip health care from millions of low-income Americans.

- Key figures at around 1030 GMT -

London - FTSE 100: FLAT at 8,775.31 points

Paris - CAC 40: DOWN 0.2 percent at 7,720.07

Frankfurt - DAX: UP 0.2 percent at 23,975.16

Tokyo - Nikkei 225: DOWN 0.1 percent at 37,446.81 (close)

Hong Kong - Hang Seng Index: UP 1.5 percent at 23,512.49 (close)

Shanghai - Composite: UP 0.4 percent at 3,361.98 (close)

New York - Dow: UP 0.1 percent at 42,305.48 points (close)

Euro/dollar: DOWN at $1.1405 from $1.1443 on Monday

Pound/dollar: DOWN at $1.3513 from $1.3548

Dollar/yen: UP at 142.98 yen from 142.71 yen

Euro/pound: DOWN at 84.41 pence from 84.46 pence

Brent North Sea Crude: UP 0.1 percent at $64.72 per barrel

West Texas Intermediate: UP 0.1 percent at $62.59 per barrel

D.Schlegel--VB