With hopes for a big interest rate cut fading, focus is on Federal Reserve boss Jerome Powell's congressional testimony this week

London (AFP) - European and US stock markets retreated on Tuesday, with the biggest declines in share prices seen in Frankfurt following a profit-warning from German chemicals giant BASF.

Asian indices mostly closed down as investors awaited the start of testimony from US Federal Reserve head Jerome Powell.

Clues on the outlook for US interest rates are keenly awaited after the country’s recent strong jobs report threw into doubt expectations for a deep cut in American borrowing costs later this month to help boost the economy.

“Equities are weaker and the dollar firmer as the prospect of the Fed not being as dovish as the market wants it to be takes the shine off things,” said Neil Wilson, analyst for Markets.com.

Frankfurt was down a hefty 1.1 percent in afternoon trading, while London slid 0.3 percent and Paris shed 0.4 percent compared with the closing levels on Monday.

Wall Street opened lower, with the Dow dropping 0.5 percent in the first minute of trading.

The euro and pound dropped versus the dollar, while oil prices rose.

- ‘Economic picture remains gloomy’ -

Shares in BASF slumped over six percent after the company slashed its earnings forecast for the full year, blaming the impact of trade conflicts on the industry, before clawing back some of the decline.

“European stocks have resumed their downward move… with a warning from BASF providing another indication that the economic picture remains gloomy,” said Chris Beauchamp, analyst at IG trading group.

“In this context, a rate cut from the Fed may have little impact.”

Shares in Deutsche Bank, Germany’s embattled biggest lender, continued to decline, as analysts said the jury was still out on the massive restructuring announced at the weekend.

Deutsche Bank stock was down 3.8 percent in afternoon trading, also among the worst performers on Frankfurt’s DAX index of blue-chip companies.

Topping London’s FTSE 100 index meanwhile was UK online supermarket Ocado, whose shares jumped 6.8 percent after the company posted strong revenues.

Traders brushed off news that a fire earlier this year at an Ocado warehouse operated by robots had cost the group almost £100 million ($125 million, 111 million euros).

Elsewhere on Tuesday, Richard Branson’s Virgin Galactic said it will become the first publicly-traded space tourism project thanks to a New York-listed company’s investment worth about $800 million.

Social Capital Hedosophia Holdings Corp. will take up to a 49-percent stake in Virgin Galactic.

The capital injection from the special-purpose acquisition company, or SPAC, will enable British billionaire Branson to fund Virgin Galactic until its spaceships are able to commercially operate and become profitable.

- Key figures around 1330 GMT -

London - FTSE 100: DOWN 0.3 percent at 7,523.48 points

Paris - CAC 40: DOWN 0.4 percent at 5,564.89

Frankfurt - DAX 30: DOWN 1.1 percent at 12,404.20

EURO STOXX 50: DOWN 0.6 percent at 3,503.59

New York - Dow: DOWN 0.5 percent at 26,678.83

Tokyo - Nikkei 225: UP 0.1 percent at 21,565.15 (close)

Hong Kong - Hang Seng: DOWN 0.8 percent at 28,116.28 (close)

Shanghai - Composite: DOWN 0.2 percent at 2,928.23 (close)

Euro/dollar: DOWN at $1.1209 from $1.1211 at 2040 GMT

Dollar/yen: UP at 108.78 yen from 108.75 yen

Pound/dollar: DOWN at $1.2469 from $1.2512

Brent North Sea crude: UP 23 cents at $64.34 per barrel

West Texas Intermediate: UP 17 cents at $57.83 per barrel