Stock markets fell yesterday and the dollar faltered, dragged down by nervousness surrounding China-US trade talks with less than one week until Washington is due to impose fresh tariffs on Chinese goods.

The London equity market was also hit by official data showing the UK economy flattened in October after contracting the previous two months.

But sterling reached an eight-month high at $1.3190, one day after reaching a 2.5-year peak versus the euro.

The British currency remains well supported going into the final straight of the UK general election Thursday, with Prime Minister Boris Johnson’s Conservatives tipped to win a majority that will help him drive through his Brexit deal.

Wall Street held steady at the opening bell as European stock markets came off their worst levels in the afternoon.

The consensus is that China and the US will eventually hammer out a partial pact as part of a wider trade agreement, which has fuelled a global equity rally for weeks.

However, comments from both sides – optimistic and downbeat – are keeping dealers on their toes.

While the week is full of key events including also central bank decisions in the US and Europe, market observers say the trade negotiations are key.

The main concern for now is that with the December 15 deadline approaching, US President Donald Trump still has not scrapped planned levies on $160 billion of Chinese goods, which many fear could derail the long-running talks.