European stocks fell across the board Tuesday as investors prepare for a key speech from U.K. Prime Minister Theresa May in which she is expected to signal a so-called Hard Brexit from the European Union that will see Britain leave the single market.
Britain's FTSE 100 fell around 27 points, or 0.4%, in the first 20 minutes of trading amid a modestly stronger pound with basic material stocks leading to the downside.
British American Tobacco (BTI) shares rose 0.4% to 4,777.1 pence each at the start of trading after the group said it reached an agreement to buy the remaining stake of Reynolds American (RAI) it doesn't already own for just under $50 billion.
The deal will see BAT pay $29.44 in cash and and 0.5260 of ordinary BAT shares for each outstanding Reynolds share, the company said in a statement, implying a total current value, based on Monday's exchange rate between the dollar and the pound, of $59.64 per share and a total value of $49.4 billion.
Germany's DAX performance index traded 95 points lower, or 0.82%, led once again by declines for the country's automakers in the wake of critical comments on the sector yesterday from President elect Donald Trump.
Much of the day's focus, however, will likely shift towards currency markets and the broader economy, as May delivers what could be the most definitive speech of her career Tuesday in which she is expected to lay out her vision of Britain's exit from the European Union at 11:45 GMT.
The pound, which has been hovering around 3-months lows in advance of her address, traded with a bit more upward bias overnight in Asia, changing hands at 1.2116 amid broader weakness for the U.S. dollar, which slipped to 5-week lows of 100.85 against a basket of six global currencies as traders increasingly questioned the protectionist tone of President elect Donald Trump's economic policies.
Investors will also likely focus on key inflation day from the U.K.'s Office for National Statistics, which is set to publish its fist estimate of consumer price acceleration in December at 09:30 GMT. Analysts are expecting a reading of 1.4%, up from the final November tally of 1.2%.
Late Monday, Bank of England Governor Mark Carney told an audience at the London School of Economics that he would keep a close eye on inflation in the months ahead in order to gauge its impact on consumption and growth.
"In the MPC's November projections, this resolution is expected to occur as imported inflation begins to weigh in coming months on people's real incomes, slowing consumption growth," he said. "This moderation in household spending reinforces the cumulative effects of a pick-up in uncertainty on investment. As a consequence, growth is expected to remain below past averages for the next few years."
Overnight in Asia, Japan's Nikkei 225 suffered its second consecutive day of declines, adding 1.48% to yesterday's 1% fall to end the session at 18,813.53 points, the lowest since Dec. 8, as a weaker dollar once again lifted the dollar and held down the performance of export-focused stocks.
The region-wide MSCI Asia ex-Japan Index, however, was quoted 0.37% higher at 07:20 GMT, thanks in part to a 7.7 point gain for South Korea's KOSPI. Australia's S&P/ASX Index, however, slipped 0.9% to 5,699.40 points.
Early indications from U.S. futures prices suggest a modestly negative start to trading on Wall Street, with the Dow Jones Industrial Average falling around 20 points, the S&P 500 slipping 1.5 points and the Nasdaq starting the session down 3.3 points.