Europe shares reverse trade-related gains on Brexit turmoil\, sterling plunges

As the UK's Brexit minister quit, positive sentiment on Europe's markets left with him .... The deal the UK has secured with Europe starting to look not so secure after all among a slew of resignations by government ministers.

The first victim: sterling.

After gains in recent days, it nosedived an immediate one per cent against the dollar.

SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "We have also seen other headlines this morning concerning a no-confidence vote, that there is pressure potentially to oust the prime minister.

All of this does add up to a very rocky road and rocky few days ahead most likely for the prime minister and this is of course a very negative factor for the pound." How different things were for Asia - buoyed by positive noises from China on their dispute with the US .... (SOUNDBITE) (Mandarin) CHINESE COMMERCE MINISTRY SPOKESMAN, GAO FENG, SAYING: "High-level contact on trade has resumed.

Working groups are keeping close contact ...." That, and a report that China has given a written response to US demands for trade reforms boosting hopes of a breakthrough.

Asian share markets liked the news - the MSCI Asia-Pacific index closed 0.7 per cent up.

But: it didn't though stop Europe's car shares sinking - after China's government doused hopes for a cut in car purchase taxes.

And on its bourses, Brexit worries once again overshadowed.

After starting positively, the bigger indices soon slipped into the red.

UK bank shares were among the worst hit - German bonds the gainers as investors sought safety.

(SOUNDBITE) (German) BAADER BANK'S HEAD OF CAPITAL MARKET ANALYSIS, ROBERT HALVER, SAYING: "We need a Brexit deal, a good Brexit deal, a clean divorce in order to avoid a big economic commotion." With a beleaguered Theresa May still tasked with getting her deal through a fractious British parliament, a deal appears anything but close.

Brace, say traders, for worse.