Global shares mixed as US-China trade tensions cloud outlook

European shares were mostly higher on Wednesday after benchmarks mostly fell in Asia ahead of talks between the U.S. and China aimed at resolving the trade war between the world’s two biggest economies.

Adding to jitters over the economic outlook, the new head of the 189-nation International Monetary Fund warned the world economy is in the grips of a “synchronized global slowdown” that will result in slower growth for 90% of the world this year.

IMF Managing Director Kristalina Georgieva said that an updated IMF forecast to be released next week will show growth falling to its lowest point since the beginning of this decade.

But European markets bounced back, with Germany’s DAX climbing 0.6% to 12,041.90. The CAC 40 in Paris picked up 0.4% to 5,479.90, while in London, the FTSE 100 edged 0.1% higher to 7,150.31.

Futures also pointed to a rebound on Wall Street, with the contract for the Dow Jones Industrial Average up 0.3% at 26,228.00. That for the S&P 500 climbed 0.4% to 2,904.30.

Asian trading was overshadowed by losses overnight in New York after the U.S. blacklisted a group of Chinese companies, claiming that their technology plays a role in the repression of China’s Muslim minority groups.

The move added to tensions ahead of the trade talks, which are due to resume on Thursday in Washington.

Japan’s Nikkei 225 index lost 0.6% to 21,456.38 and the Hang Seng in Hong Kong dropped 0.8% to 25,682.81. Australia’s S&P ASX 200 shed 0.7% to 6,546.70. The Shanghai Composite index reversed early losses, gaining 0.4% to 2,924.86. The Sensex in India picked up 1.1% to 37,937.40, while shares in Taiwan and Southeast Asia declined. South Korean and Malaysian markets were closed for holidays.

China demanded Washington lift the sanctions on Chinese tech companies and warned Wednesday it will “resolutely safeguard” the country’s interests.

The Ministry of Commerce criticized the curbs imposed on sales of U.S. technology to a group of Chinese companies as interference in the country’s affairs.

“The US tactics are undoubtedly a high risk, seeking to pressure the Chinese trade delegation before the main event really gets underway,” Jeffrey Halley of Oanda said in a commentary.

In New York, the S&P 500 index lost 1.6% to 2,893.06. The Dow slid 1.2% to 26,164.04 and the Nasdaq, which is heavily weighted with technology companies, dropped 1.7%, to 7,823.78.

Smaller company stocks were also big decliners, sending the Russell 2000 index down 1.7%, to 1,472.60.

The yield on the 10-year Treasury fell to 1.53% from 1.55% late Monday, a signal that investors are favoring lower-risk investments amid the trade war turmoil. Utilities and real estate companies, both safe-play sectors, held up better than the rest of the market, though they also ended the day in the red.

The latest escalation in U.S.-China tensions adds yet another worry for investors already anxious over a bevy of political and economic concerns. Last week, the S&P 500 posted its first back-to-back losses of 1% this year as surprisingly weak numbers in surveys of manufacturing and service industries showed the U.S.-China trade war is threatening U.S. economic growth.

Benchmark crude oil dropped 12 cents to $52.51 per barrel in electronic trading on the New York Mercantile Exchange. It fell 12 cents to settle at $52.63 a barrel on Wednesday. Brent crude oil, the international standard, slid 19 cents to $58.05 a barrel.

While the price of U.S. crude is up just under 9% so far this year, it remains off by more than 27% from a year ago. That slide in prices over the past 12 months has weighed on energy stocks this year.

The dollar rose to 107.26 Japanese yen from 107.07 yen on Tuesday. The euro rose to $1.0989 from $1.0956.