* Washington could announce plans for tariffs as early as Weds
* China shares lead weakness trade worries
* Mixed response in European shares to earnings, trade conflict
* Fed and BOE rate meetings now a market focus
By Tom Finn
LONDON, Aug 1 (Reuters) - World stocks fell and the dollar strengthened on Wednesday on fears of an imminent escalation in the U.S.-China tariff war, although strong corporate earnings eased investor concerns about a recent sell-off in the tech sector.
Conflicting signs over which direction the trade conflict between the United States and China is headed have yanked markets in opposite directions.
A Bloomberg report that the world’s two largest economics were seeking to resume trade talks to defuse a battle over import tariffs saw stock markets edge up globally on Tuesday.
But a source said the Trump administration plans to propose a 25 percent tariff on $200 billion in Chinese imports, up from an original 10 percent, in a bid to pressure Beijing into making trade concessions.
That injected uncertainty into financial markets and new concern about what it would mean for China and the global economy.
Chinese shares, the offshore yuan and the Australian dollar all weakened.
European shares were mixed as a fresh batch of positive corporate earnings offset the worries about the U.S.-China trade conflict.
The pan-European STOXX 600 fell 0.2 percent while Germany’s DAX slipped 0.13 percent. Britain’s FTSE 100 tumbled 0.86 percent while France’s CAC 40 rose 0.13 percent.
Investors fear a trade war between Washington and Beijing could hit global growth, and prominent U.S. business groups have condemned Trump’s aggressive tariffs.
But analysts said Wednesday’s reaction remained fairly muted.
“Overall the markets’ reaction has been subdued. The markets have calmed down relatively quickly. Maybe the market is underestimating the economic impacts of the tariffs and that is why it is keeping calm,” said Thu Lan Nguyen, a currencies strategist at Commerzbank in Frankfurt.
Stronger than expected earnings by Apple Inc pushed quarterly results beyond Wall Street targets on Tuesday, allaying some concerns about a tech sector shaken by recent sell-offs in Facebook Inc, Twitter Inc and Netflix Inc.
The tech retreat has overshadowed a generally buoyant U.S. earnings season, with average 22.6 percent profit growth and 83 percent of companies beating consensus estimates so far.
World stocks in July recorded their best monthly returns since January, despite trade tensions, growth fears and tech selling.
The yen continued to depreciate, falling 0.2 percent versus the dollar to 112.10 as Tuesday’s pledge by the Bank of Japan to keep rates extremely low for an extended period continued to weigh on the Japanese currency.
BOJ’s policy announcement on Tuesday to make its massive stimulus programme more flexible provided some comfort to bond investors.
Traders appeared to be putting the BOJ’s tolerance for higher yields to the test on Wednesday as the benchmark 10-year JGB yield rose to 0.12 percent in its biggest one-day rise in two years.
“Since the BOJ was vague about what its flexibility means, the market wants to test the bank’s pain threshold,” said Jan von Gerich, chief analyst at Nordea in Helsinki.
The central bank’s policy tweaks did not appear to show any inclination from the central bank to make a radical shift from its accommodative stance.
Investors are turning their attention to other central bank decisions this week. The U.S. Federal Reserve concludes its policy meeting on Wednesday.
Markets await the Fed policy statement for signs of whether the expected two rate hikes for the remainder of 2018 can be cemented into pricing and for any change in the tone of its policy statement.
“Buying sentiment towards the dollar could receive a boost if the central bank strikes a hawkish tone,” Lukman Otunuga, research analyst at FXTM, wrote in a note.
The dollar index, which tracks the greenback against a basket of six major rivals, gained 0.2 percent to 94.663.
In Britain, a 25 basis-point hike is now widely expected on Thursday when the Bank of England meets, despite economic weakness linked to Britain’s looming European Union exit.
The pound held at $1.3119, above a more than 10-month trough of $1.2955 touched earlier in July.
In commodities, oil prices fell on industry data showing an unexpected rise in U.S. crude stockpiles. The slump in crude prices comes after their largest monthly decline in two years in July.
U.S. crude dipped 0.6 percent to $73.63 a barrel, while Brent LCOc1 gave up 0.8 percent to $73.61 per barrel.
Spot gold fell 0.1 percent to $1,222.99 per ounce. (Additional reporting by Tommy Wilkes and Dhara Ranasinghe; Editing by Angus MacSwan)