By Mike Bird

European stocks traded lower in morning trading on Tuesday, with bank stocks falling more sharply.

The Stoxx Europe 600 index fell by 0.2%. Banks listed on the Stoxx 600 index fell by 0.78%. U.S. futures were little changed, down 0.04% for the S&P 500 and 0.06% for the Dow Jones Industrial Average.

In currency markets, sterling's decline against the dollar continued, as it dropped 0.29% to $1.213 after a fall of more than 1% on Monday. The Wall Street Journal dollar index, which measures the greenback against a basket of currencies, was down 0.04%.

Sterling's fall came after comments made by British Prime Minister Theresa May on Sunday, which refreshed investors' concerns about the U.K.'s future relationship with the European Union.

The FTSE 100, the U.K.'s flagship equity index, bucked the trend on Tuesday with a rise of 0.19%. The index tends to rise as sterling falls, since the companies listed on the index make more than 70% of their revenues abroad.

The index has closed at fresh record highs for eight consecutive trading days--if it closes at another record high, it would be the longest streak in 30 years.

In Asia, Chinese producer price data showed a sharp rise in December, increasing by 5.5% year-over-year, up from 3.3% in November.

The return of modest inflation, fueled particularly by rising oil prices, has been a major theme for markets in recent months.

"Inflation is now picking up towards those 2% targets in the U.S. and U.K., and it's heating up at a faster pace in emerging markets too," said Nandini Ramakrishnan, global market strategist at J.P. Morgan Asset Management.

"This inflation is quite healthy for U.S. equities, particularly some sectors like banks and financials," she added.

Consumer prices rose by 1.2% year-over-year in the U.K. in November, and 1.7% in Germany and the U.S. during the same period.

"Europe will particularly be a focus as thoughts again turn to inflation risks in the face of their accommodative stance," analysts at Lloyds Bank wrote in a research note Tuesday.

Japan's Nikkei closed down 0.79%, following a public holiday. Hong Kong's Hang Seng closed up 0.83%.

Write to Mike Bird at Mike.Bird@wsj.com

(END) Dow Jones Newswires

January 10, 2017 05:27 ET (10:27 GMT)

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