By Avantika Chilkoti 

European stocks drifted lower Thursday after a strong session in Asia, as signs of improving U.S.-China trade relations and British Prime Minister Theresa May's survival of a no-confidence vote offset concerns about a creeping economic slowdown.

The Stoxx Europe 600 was down 0.2%. In Asia, Japan's Nikkei Stock Average was up 1% while Hong Kong's Hang Seng Index gained 1.3%.

In the U.S., futures pointed to opening rises of 0.1% for the S&P 500 and the Dow Jones Industrial Average.

On Wednesday, The Wall Street Journal reported China was set to introduce an industrial policy that is friendlier to foreign businesses, and President Trump said on Twitter earlier in the week that "productive" trade talks were under way.

Still, investors remain skittish about how long the U.S. economy can continue to grow, warning that a flattening yield curve could signal a coming slowdown in the world's largest economy.

Gerard Fitzpatrick, chief investment officer for fixed income at Russell Investments, said the market feels "heavy" as geopolitical concerns have weighed on equities, reversing the rally of the early part of the year.

"Valuations had been quite elevated and now they have been shocked," he said.

The pound was up 0.2% against the U.S. dollar Thursday, after the British prime minister on Wednesday narrowly survived a vote of no confidence triggered by rebel members of her Conservative Party.

Though the vote erases the threat of another leadership challenge for a year, analysts say it has weakened Mrs. May's authority and delayed negotiations over the Brexit deal.

Dec Mullarkey, managing director of Investment Strategy at Sun Life Investment Management, said the vote reduces the risk of a hard Brexit, where the U.K. tumbles out of the bloc without an agreement.

"While some tail risk has been reduced, the road ahead is still treacherous, so any celebratory rally will be short lived," he said in a note. "Markets need to quickly focus on the prospects of May getting her EU withdrawal agreement approved in January."

Investors are also watching the European Central Bank, which is expected to announce an end to its bond-buying program at a meeting Thursday amid rising concerns about global growth.

The 10-year U.S. Treasury yield dipped to 2.893% from 2.908% Wednesday. Yields move inversely to prices.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was broadly flat.

In commodities, Brent crude, the global oil price gauge, was down 0.2%. Gold was mostly unchanged.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com

(END) Dow Jones Newswires

December 13, 2018 05:38 ET (10:38 GMT)

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