* Concerns grow that trade war truce unlikely
* European stocks stabilise after Asian shares fall most in
a week
* Powell flags more U.S. rate cuts; curve steepens
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Oct 9 (Reuters) - European stocks steadied on
Wednesday, but sentiment remained fragile as negotiations for a
Brexit withdrawal deal seemed all but dead and the U.S.-China
trade dispute triggered another round of selling.
Markets dropped this on concern the U.S.-China conflict over
trade and foreign policy is nowhere near a resolution and is
increasingly damaging the global economy.
Asian stocks suffered their biggest fall in a week on
Wednesday, following heavy losses on Wall Street and in Europe
on Tuesday.
European shares managed to find a floor, however, with the
pan-European Euro STOXX .STOXX inching up 0.1%. Germany's DAX
.GDAXI rose 0.48%, France's CAC 40 .FCHI 0.24% and Britain's
FTSE 100 .FTSE 0.28%.
Washington and Beijing are engaged in a year-long row that
has expanded beyond trade policy, suggesting even more damage to
a global economy that is already showing signs of slowing.
Hopes that the two sides could reach a truce this week faded
after Donald Trump's administration introduced visa restrictions
on Chinese officials and added more Chinese companies to a U.S.
trade blacklist.
A U.S. official said high-level trade talks would still take
place on Thursday and Friday as planned, but Trump has said
tariffs on Chinese imports will rise on Oct. 15 if no progress
is made in the negotiations.
Washington is also moving ahead with discussions about
restrictions on capital flows into China, Bloomberg reported.
"U.S./China trade newsflow seemed to take a backward step
ahead of important talks this week and UK/EU Brexit talks not
only unravelled but the relationship between the two sides seems
to be in danger of breaking down completely," said Jim Reid, an
analyst at Deutsche Bank.
"So the obvious cracks that have been appearing over more
than four decades of globalisation are in danger of widening
significantly in the days and weeks ahead."
U.S. stock futures ESc1 rose 0.34%, following a 1.56% drop
for the S&P 500 .SPX on Tuesday in response to the U.S. visa
restrictions.
Oil prices fell for a third consecutive day as traders
worried about the impact of the U.S.-China tensions on global
demand.
The U.S. Treasury yield curve steepened after U.S. Federal
Reserve Chair Jerome Powell signalled further interest rate cuts
and the resumption of bond purchases following a recent spike in
money-market rates.
BREXIT TALKS
In Europe, talks between the European Union and Britain over
an agreement to cover London's departure from the EU on Oct. 31
appeared to be going nowhere. British lawmakers have voted to force Prime Minister Boris
Johnson to seek an extension to the departure date if he cannot
agree a deal, but the prospect of more prolonged political
uncertainty is worrying investors.
Sterling was last up 0.5% at $1.2280 GBP=D3 after a media
report that the EU would make a major concession in the
negotiations.
Many economists say markets have already priced in the
failure to reach a deal any time soon.
"In the interminably tedious EU-UK divorce process, things
are getting uninteresting. Tweets are being fired. Latin quotes
are being sent out. Markets did not expect a deal to be done,
and so should remain indifferent (unless it looks as if a
no-deal exit will be introduced in defiance of legislation),"
said UBS economist Paul Donovan.
Currency markets elsewhere were mostly quiet. With some
semblance of risk appetite returning, the safe-haven dollar
fell, shedding 0.3% against the euro to $1.0987 EUR= .
The offshore yuan, which fell on Tuesday, recovered 0.3% to
7.1413 yuan per dollar CNH=EBS .
In bond markets, U.S. Treasury and euro zone government bond
yields ticked higher.
The spread between two-year and 10-year Treasuries, the most
common definition of the yield curve, widened to 11.3 basis
points US2US10=RR .
Spot gold prices edged higher to $1,506 XAU= .
Brent crude futures fell 0.34% to $58.04 a barrel LCOc1 .
U.S. West Texas Intermediate crude dropped 0.34% to $52.45
CLc1 .