European shares are set to begin Wednesday’s session in the red amid worries over the U.S.-China trade war and a potential budget standoff between Italy and the EU.
Britain’s FTSE 100 is seen sliding 42 points to 7,229, Germany’s DAX off by 90 points at 11,933, and France’s CAC down 41 points at 5,253, according to IG index data.
Traders are taking a more cautious approach to risk assets, with the trade battle between Washington and Beijing proving to be a main point of anxiety for global markets.
President Donald Trump said earlier this week that his administration was “not ready” to make a deal with China, adding tariffs on the country’s imports could go up “substantially.”
Meanwhile, a Chinese official hinted Tuesday that Beijing could use its strength in rare earth minerals as leverage in its trade dispute with the U.S.
Italy vs the EU
Back in Europe, fears of a coming political battle between Rome and Brussels returned this week as reports emerged stating the EU is considering disciplinary action over the Italian government’s failure to rein in debt.
Italy’s Deputy Prime Minister Matteo Salvini has said Rome could be targeted with a 3 billion euro ($3.3 billion) accumulating debt and a deficit that breaks the bloc’s rules.
A European official told CNBC he could not confirm whether Italy would be slapped with a hefty fine, but said the EU executive had “some concerns” about the country’s fiscal trajectory.
Also weighing on European investors was disappointing economic data. An indicator of German consumer sentiment fell to its lowest level in two years on Tuesday.
On Wednesday, investors are likely to look out for German import prices and the unemployment rate for April, while France will release economic growth and inflation figures.
In other economic news to watch for Wednesday, the European Central Bank will publish its biannual review of potential risks to financial stability in the euro zone at 9 a.m. London time.