After Donald Trump's supporters last week stormed the Capitol Building, there are fears of fresh unrest in Washington during Joe Biden's inauguration on January 20

London (AFP) - European stock indices declined Tuesday as hopes for coronavirus vaccinations and US monetary stimulus competed with fears over surging infections, tougher lockdowns and political turmoil across the Atlantic, traders said.

The dollar was mostly lower against other major currencies, while oil prices rose.

Gains by the pound against the dollar weighed on the London stock market which includes many multinationals that earn substantial amounts of their profits in the US currency.

Bitcoin was steadier after swings of 20 percent in recent days, trading for around $34,500.

“The fact that vaccines are being rolled out will be comforting for investors but the first quarter is shaping up to be far more painful than anticipated,” said Craig Erlam, analyst at Oanda trading group.

“This may dampen sentiment in the coming weeks, especially if corporate America raises concerns during fourth-quarter earnings season, which kicks off later this week.”

Another focus of attention for traders was Washington, where Democrats are seeking a historic second impeachment of Donald Trump, whom they accuse of inciting an attack on the Capitol Building that left five people dead.

There is concern however that the move could distract from the Democrats’ plans for a bigger stimulus bill to soften the virus’s impact, and some warn the row could overshadow President-elect Joe Biden’s first months in office.

He has called for a huge package including $2,000 cash handouts, though analysts said that while markets would welcome a spending splurge, there were concerns about the fiscal implications.

Bets on another rescue deal have ramped up inflation expectations, with 10-year Treasury yields above one percent for the first time since March and talk swirling that the US Federal Reserve could begin to consider winding down its vast bond-buying scheme.

A higher yield “points to higher inflation down the road – which is negative for stocks,” Lynx Equity Strategies said in a client note. “We are not there yet, but as the 10-year inches higher – the closer we get.”

On Wall Street, the Dow Jones index was slightly softer in midday trading.

- Key figures around 1645 GMT -

New York - Dow: FLAT at 30,995.34 points

EURO STOXX 50: DOWN 0.2 percent at 3,612.13

London - FTSE 100: DOWN 0.7 percent at 6,754.11 (close)

Frankfurt - DAX 30: DOWN 0.1 percent at 13,925.06 (close)

Paris - CAC 40: DOWN 0.2 percent at 5,650.97 (close)

Tokyo - Nikkei 225: UP 0.1 percent at 28,164.34 (close)

Hong Kong - Hang Seng: UP 1.3 percent at 28,276.75 (close)

Shanghai - Composite: UP 2.2 percent at 3,608.34 (close)

Euro/dollar: UP at $1.2160 from $1.2153 at 2230 GMT

Dollar/yen: FLAT at 104.20

Pound/dollar: UP at $1.3619 from $1.3511

Euro/pound: DOWN at 89.27 pence from 89.89 pence

West Texas Intermediate: UP 1.6 percent at $53.09 per barrel

Brent North Sea crude: UP 1.6 percent at $56.56 per barrel