European markets set to open lower as positive sentiment vanishes

LONDON — European stocks are expected to open lower on Tuesday, reversing largely positive sentiment at the start of the week, despite the threat of a new trade dispute between the U.S. and China.

The U.K.'s FTSE index is expected to open 0.15% lower, Germany's DAX down 0.11%, France's CAC 40 down 0.16% and Italy's FTSE MIB 0.3% lower, according to data from IG.

Markets have been on tenterhooks after U.S. President Donald Trump threatened China with a fresh wave of tariff increases to "financially counter" new export controls that China imposed on rare earth minerals.

China controls about 70% of the global supply of rare earths minerals, which are critical for high-tech industries, including automobiles, defense and semiconductors.

Trump on Sunday appeared to suggest in a Truth Social post that he might not follow through on his threat, however, posting that trade relations with China "will all be fine."

After a recent rally on stimulus hopes, China's stock market rebound may be showing signs of strain as renewed trade tensions threaten to derail investor optimism.

Investors will be watching for news from the IMF and World Bank annual meetings in Washington. The IMF is set to release its latest World Economic Outlook report Tuesday.

The meetings bring together central bankers, ministers of finance and development, the private sector, civil society and academia to discuss issues of global concern, including the global economy, poverty eradication and economic development.

Earnings are due from Givaudan and Ericsson on Tuesday. On the data front, German inflation and U.K. unemployment data are coming up, as well as a reading of European economic sentiment, at 10 a.m. London time.