Reports that US President Donald Trump is mulling severe new restrictions on investment in China shook Wall Street on Friday, sending stocks into the red.

The downward shift in New York was an about-face from the general upward movement seen earlier in Europe, where markets climbed as analysts said fresh optimism about the US-China trade talks was taking hold.

Multiple US media reports said the White House is considering proposals to de-list Chinese companies from US stock markets or block US investment in China, threats that appear intended to ratchet up pressure on Beijing to strike a bargain as the trade war stretches into its second year.

Trump has said in recent weeks that Beijing may be holding off on reaching a trade deal, betting that he will not be re-elected next year.

A batch of lackluster economic data released Friday, which underscored the strains the trade war has created for the United States, did not help.

US consumer spending slowed in August, while business investment in manufactured goods and sales of autos as well as other big-ticket items also weakened that month, according to the Commerce Department.

US stocks closed the week in the red for the second week in a row, with the Nasdaq recording its worst week in nine.

Gregori Volokhine, strategist for Meeschaert Financial Services, told AFP the reports of additional restrictions on China appeared to be part of the Trump administration's bargaining strategy.

UK economy weakens

Word of the possible new US policies on China also hit oil prices.

Across the Atlantic earlier in the day, media reports confirming that high-level US-China trade talks are set to resume in Washington on October 10 had lightened the mood.

"Europe kept a smile plastered on its face," said Connor Campbell at Spreadex.

The pound hit near four-week lows against the dollar amid persistent Brexit uncertainty. But London stocks were the continent's top performer by the close, boosted by the weaker currency -- which lifts earnings for companies that do business in dollars.

Bank of England board member Michael Saunders appeared to open the door to a rate cut, said Fiona Cincotta, senior market analyst at City Index trading group.

But the very same factor boosting stock sentiment caused the pound to "tank," she said.

"The comments from Saunders highlight the marked weakening of the UK economy over recent quarters, dragged down not only by Brexit uncertainty but also softer global growth," Cincotta added.

Key figures around 2030 GMT

New York - Dow: DOWN 0.3 percent at 26,820.25 (close)

New York - S&P 500: DOWN 0.5 percent at 2,961.79 (close)

New York - Nasdaq: DOWN 1.1 percent at 7,939.63 (close)

London - FTSE 100: UP 1.0 percent at 7,426.21 points (close)

Frankfurt - DAX 30: UP 0.8 percent at 12,380.94 (close)

Paris - CAC 40: UP 0.4 percent at 5,640.58 (close)

EURO STOXX 50: UP 0.4 percent at 3,545.88 (close)

Hong Kong - Hang Seng: DOWN 0.3 percent at 25,954.81 (close)

Shanghai - Composite: UP 0.1 percent at 2,932.167 (close)

Tokyo - Nikkei 225: DOWN 0.8 percent at 21,878.9 (close)

Pound/dollar: DOWN at $1.2293 from $1.2321 at 2030 GMT

Euro/pound: UP at 89.01 pence from 88.63

Euro/dollar: UP at $1.0941 from $1.0920

Dollar/yen: UP at 107.95 from 107.88 yen

Brent North Sea crude: DOWN 1.3% percent at $61.91 per barrel

West Texas Intermediate: UP 0.9 percent at $55.91