European equity benchmarks pared early gains to trade sharply lower on Tuesday a day after disappointing manufacturing data in the UK sent the pound falling a day earlier and against a backdrop of uncertainty over Canada's position in the US' new trade agreement.
Factory growth in the UK slumped to a 25-month low in August, according to data published by IHS Markit on Monday, as job creation slowed to near stagnation and business optimism slumped to a 22-month low. The UK manufacturing purchasing managers' index registered a reading of 52.8 in August, down from a revised reading of 53.8 in July. Readings above 50 signal expansion while those below denote contraction.
Meanwhile, comments made by US President Donald Trump over the weekend relating to a trade deal with Mexico which could theoretically leave out Canada dampened sentiment. Trump tweeted on the weekend that there was "no political necessity to keep Canada in the new NAFTA deal", referring to the North American Free Trade Agreement. The comments came after the White House announced last week that it had secured a preliminary trade agreement with Mexico.
Trump, who has been an outspoken critic of the original NAFTA agreement, said that the old accord was "one of the worst trade deals ever made" in a tweet on Saturday.
The pound meanwhile was falling lower against the dollar after Britain's European Union negotiator Michel Barnier was cited by several news agencies as saying in an interview with the Frankfurter Allgemeine Zeitung over the weekend that he "strongly opposed" the British proposal for terms of a deal to leave the EU.
British Prime Minister Theresa May's plans would "be the end of the single market and the European project", according to the BBC's translation of Barnier's comments which were published in German originally. Britain has until March 2019 to strike up a new set of trading relationships with the remaining members of the EU before it leaves the bloc.
Sterling was trading for $1.28231 recently, 0.35% lower than $1.28683 at midnight local time.
In equity news, WPP (WPP.L, WPP) was leading the decliners on London's FTSE 100 Index, down by 6.2% after the advertising and public relations giant posted a drop in revenue in the first half of the year as sales in its largest market, North America, edged lower. Shares in food delivery company Just Eat (JE.L), 4.0% lower and property development companies Persimmon (PSN.L) and Taylor Wimpey (TW.L), 2.4% and 2.0% lower, respectively.
On Frankfurt's DAX, chemical and consumer goods company Henkel (HEN.DE) was 2.1% lower, followed by industrial manufacturing major Siemens(SIE.DE), down by 0.9% and building materials provider HeidelbergCement (HEI.DE), 0.9% lower.
And, on Paris' CAC-40, communications major Publicis (PUB.PA) was 2.5% lower, followed by car-maker Renault (RNO.PA), 2.2% lower and STMicroelectronics ( STM ), a manufacturer of chips, 2.5% lower.
London's FTSE 100 Index was 0.29% lower, Frankfurt's DAX was down by 1.0%, Paris' CAC-40 was 1.21% lower and the pan-European Stoxx 600 Index was 0.64% lower at the time of writing.