Europe open: Stocks slip ahead of Sino-US trade talks

European stocks were in the red in early trade on Monday, unable to hold on to opening gains as investors eyed the latest trade talks between the US and China.

At 1000 GMT, the benchmark Stoxx Europe 600 index, Germany's DAX and France's CAC 40 were down 0.3% at 342.36, 10,739.13 and 4,722.23, respectively, having kicked the session off higher.

Officials from the US and China were due to meet for talks in Beijing later in the day in what will be the first discussions since Trump and Xi Jinping agreed a temporary truce in December.

"Even if sufficient progress is made by the beginning of March to assuage market fears as regards this particular issue, we would still be loath to signal the all clear," said Rabobank. It pointed to the fact that higher local wages have eroded China’s competitive advantage.

"The country simply must move up the value chain if output is to be maintained and this will make it hard to avoid treading on the US’ toes through intellectual property infringements," it said.

It also noted that the slowdown in growth already in train will increase the political imperative to safeguard output over the longer run.

In the US, meanwhile, the government shutdown entered its third week. Trump promised over the weekend to build his Mexico border wall out of steel as a compromise and repeated the threat that he may seek the necessary funding by declaring a state of emergency.

"While the direct impact of the shutdown is arguably limited, indirectly the fact that the president is considering bypassing Congress entirely by declaring an emergency highlights the elevated degree of policy paralysis in the US which is a further negative from a growth outlook perspective," Rabobank said.

In corporate news, France's Alstom was in the red following a report in Les Echos that the Alstom-Siemens rail deal is not likely to be approved by European Authorities.

Elsewhere, Heineken fizzed lower as Goldman Sachs cut the stock to 'sell' from 'buy'.

On the data front, figures out earlier showed that German retail sales rose 1.4% on month in November, beating expectations for a 0.4% increase. The headline non-working day adjusted year-over-year rate fell to 1.1% from a revised 5.2% in October.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "German consumers’ spending appeared to have picked up in Q4, a bit, though we have to be careful making too much of the retail sales data given their usual volatility.

"Two points are important to make at the outset. First, Black Friday almost surely boosted today’s headline - seasonals haven’t yet caught up to this trend - so we have to expect a reversal in next month’s report. Second, the plunge in the headline year-over-year rate is misleading. The fully adjusted rate fell only marginally, by 0.2pp to 0.7%. Factoring in a 0.8% month-to-month dip in December, we estimate that retail sales increased 0.3% quarter-on-quarter in Q4, modest, but significantly better than the 0.5% fall in Q3."

Meanwhile, factory orders in the country fell 1% on the month in November, falling short of consensus expectations for a 0.1% dip. On the year, factory orders were down 4.3% compared to a 2.7% drop in October.

Elsewhere, the headline Sentix investor sentiment index for the eurozone slipped to -1.5 in January from -0.3 in December last year, coming in ahead of consensus expectations for a reading of -2.0. The index for the current situation edged up to 18.0 from 20.0 in December, but the expectations index fell to -19.3 from 18.8 last month.

"These are levels not seen since the sovereign debt crisis, highlighting just how depressed investor confidence is at the moment," said Vistesen.