European stocks attempt rebound

Europe's stock markets attempted to recover on Tuesday after slumping the previous day on global trade war concerns, dealers said.

In early afternoon deals, Frankfurt rose 0.3% and Paris gained 0.4%, while London won 0.5% by midday.

Markets had plummeted on Monday, with European indices shedding about two percent, on reports that US President Donald Trump was planning new curbs on Chinese investment in America.

Trump has threatened to strike back against China's retaliation to the US tariffs that are due to take effect July 6.

"We have seen some tentative buying across indices, an almost inevitable development after Monday's drop, but the gains do little to dent the heavy losses suffered yesterday," said IG analyst Chris Beauchamp on Tuesday.

Trade war rhetoric

"The question ... is whether we have further to go before equities find a bottom," he added.

"With trade war rhetoric still in abundance, it might be too early to sound the all-clear."

Asian stocks banked sharply lower on Tuesday following steep falls on Wall Street, amid fear that Washington was readying a new phase in its economic confrontation with China.

China was hardest hit, dropping close to 2% at the session low before paring losses later in the day.

Tokyo followed the same pattern, even ending up fractionally in the black on bargain-hunting late in the day.

Despite the slight bump back up, analysts warned that market sentiment remained fragile.

"The market is in a really bad state. It is in as dangerous a place as it was in 2015," said Zhang Qi, an analyst with Haitong Securities in Shanghai, referring to the 2015 market swing that saw the Shanghai index plunging more than 40% within three months.

Beauchamp noted: "The talk of trade wars certainly raises the risk of a re-run of that volatility."

This week, trade frictions topped market players' concerns.

Washington has already announced it will impose investment restrictions on Chinese companies by June 30, with the Wall Street Journal reporting that any firm that is 25% Chinese-held would face curbs.

'Diplomatic doublespeak'

The reports drove US stocks down 2% at the lowest point on Monday but they recovered some of their losses after senior White House economic adviser Peter Navarro sought to ease fears in a TV interview.

Treasury Secretary Steven Mnuchin also rebuffed the reports but the mixed messages left some traders bemused.

"Despite the rebound, there remains a considerable degree of scepticism," said Stephen Innes, head of trading at OANDA, adding that investors were not sure whether the comments were "diplomatic doublespeak or a meaningful denial".

In a concrete consequence of the tit-for-tat trade blows, US motorbike maker Harley-Davidson said late on Monday it planned to shift some manufacturing overseas to avoid retaliatory European tariffs imposed last week.

This sparked a furious response from Trump who said he was "surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag," adding that he had "fought hard for them".