LONDON (Reuters) – Global shares eked out gains on Tuesday as some investors held out hopes for a trade deal between the United States and China, even as the countries continued to raise tariffs on each other last week.

Shares in Asia gained following a rise in U.S. stocks on Monday, which came after U.S. President Donald Trump predicted a trade deal with China. The optimism didn’t carry over to Europe however, with most major country share indices down in early deals.

Britain’s FTSE 100 index slipped 0.4% as investors returned from a bank holiday weekend, and the pan-European STOXX 600 was down 0.25% by 0729 GMT.

While Germany’s DAX fell 0.3% and France’s CAC 40 was down nearly half a percent, the outlier was Italy’s FTSE MIB, which gained 0.04% as the country’s ruling 5-Star Movement and the opposition Democratic Party appeared on the verge of a deal to form a new Italian government.

MSCI’S All Country World Index, which tracks shares across 47 countries, was up 0.04% on the day.

Trump said on Monday that Chinese officials had contacted their U.S. trade counterparts and offered to resume negotiations, an assertion that China declined to confirm.

His comments helped temper sharp losses in global markets after both sides announced new tariffs on Friday, in the latest escalation in the protracted trade dispute.

“Global investors have had their emotions toyed with amidst the ever-shifting sands of the U.S.-China trade conflict,” said Han Tan, market analyst at FXTM.

“Market nerves have been left raw, with the delicate sentiment prompting knee-jerk reactions to every nuance pertaining to the highly unpredictable U.S.-China trade impasse.”

Until there are clear signs of progress in trade negotiations between the two countries, risk-aversion will continue to dominate market sentiment, Tan added.

Traders work at Frankfurt’s stock exchange in Frankfurt, Germany, February 6, 2018. Picture taken with a fisheye lens. REUTERS/Ralph Orlowski

The Japanese yen, which rallies when markets turn risk averse, was up half a percent to the dollar.

Gold, another safe haven, was half a percent higher, and just off a more than six-year high hit in the previous session.

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.25% after dropping 1.3% the previous day.

Japan’s Nikkei rose 1%.

The Shanghai Composite Index rallied 1.35%, with an additional boost from data showing China’s industrial firms returned to profit in July.

South Korea’s KOSPI added 0.4%.

Markets have been quick to rally on any positive signs coming out of the trade negotiations between the U.S. and China this year. However, tariffs have only escalated between the two countries since 2018, creating uncertainty and denting growth.

“Although the continued resilience of consumers keeps us confident in the global economic outlook, we do not see this as the best environment for taking risk on stocks,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“As a result, we make three changes to our tactical asset allocation. We remove our overweight to global equities versus high grade bonds and initiate an underweight to emerging market stocks versus high grade bonds. Separately, we also adjust our overweight to select higher yielding emerging market currencies.”

The dollar index versus a basket of six major currencies stood at 97.875, falling 0.2%.

FILE PHOTO: Passersby are reflected on a stock quotation board outside a brokerage in Tokyo, Japan, August 6, 2019. REUTERS/Issei Kato

The euro was 0.1% higher at $1.1109 after losing 0.4% on Monday.

Oil prices rose.

Brent crude futures were up 0.39% at $58.93 per barrel after losing 1% the previous day. U.S. crude rose 0.48% to $53.97 per barrel.

Reporting by Ritvik Carvalho; Editing by Andrew Heavens

Our Standards:The Thomson Reuters Trust Principles.

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