AP Photo/Richard Drew

European and Asian equities and US futures fell Wednesday amid fears of a collapse of US-China trade talks, following Wall Street's rout on Tuesday.

US President Donald Trump intends to raise tariffs to 25% from 10% on $200 billion worth of Chinese goods on Friday.

China's top trade negotiator is expected to visit Washington on Thursday and Friday in a last-minute attempt to strike a deal and prevent the tariff hikes.

"Investors are not holding their breath for any serious progress in these talks," said Jasper Lawler at London Capital Group.



European and Asian equities and US futures slumped Wednesday as traders, fearing a collapse of US-China trade negotiations, followed up Wall Street's Tuesday rout and sold off riskier assets.

"Given the continued signs of risk aversion in the markets, investors are not holding their breath for any serious progress in these talks," Jasper Lawler, the head of research at London Capital Group, said in a morning note. "The chances of the two powers resolving their issues over the coming two days of talks appears unlikely."

Investors may have taken for granted that the US-China trade dispute would be resolved.

"The S&P looks mispriced close to all-time highs and we can expect to see the US index experience a few more sessions similar to last night's," Lawler wrote. The breakdown of trade talks could also spark a slowdown in the global economy, which was only starting to stabilize, he added.

US trade officials have accused their Chinese counterparts of walking back concessions upon which the two sides had already agreed. In tweets over the weekend, President Donald Trump threatened to raise tariffs to 25% from 10% on $200 billion worth of Chinese goods on Friday and to eventually slap 25% tariffs on a further $325 billion worth of Chinese products.

China's top trade negotiator, Vice Premier Liu He, is expected to visit Washington on Thursday and Friday in a last-minute attempt to strike a deal and prevent the hike, according to Reuters.

Trump's latest salvo "decimated the 'Goldilocks' environment for equity traders, where subdued geopolitical risks, steady Fed policy, and low inflation were only hinting on more gains for the global indices," said Konstantinos Anthis, the head of research at ADSS.

In response, the Dow Jones Industrial Average dropped 1.8% on Tuesday — its biggest fall since early January — while both the S&P 500 and the Nasdaq slid 2%.

The fallout from a collapse in trade talks could be much greater, at least according to one market watcher.

"If there is no deal between the two superpowers by Friday, we are expecting the global equity markets to drop by at least 20%," said Naeem Aslam, the chief market analyst at ThinkMarkets UK.

Here's the market roundup as of 11:40 a.m. in London (6:40 a.m. ET):

US markets were set to open lower. The futures underlying the Dow , the S&P , and the Nasdaq were all down by 0.3% to 0.5%.

, the , and the were all down by 0.3% to 0.5%. European equities were down. Britain's FTSE 100 was down 0.3%, the Euro Stoxx 50 and France's CAC 40 were down 0.2%, and Germany's DAX was down about 0.1%.

was down 0.3%, the and France's were down 0.2%, and Germany's was down about 0.1%. Asian indexes closed broadly lower, with the Shanghai Composite down 1.1%, the China A50 down 1.8%, and Hong Kong's Hang Seng down 1.2%.

down 1.1%, the down 1.8%, and Hong Kong's down 1.2%. Oil prices were falling, with Brent crude down 0.6% and West Texas Intermediate crude down 0.4%.

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