Traders work on the floor of the New York Stock Exchange. Image Credit: AP

London: Global stock markets fell on Tuesday, as China-US trade talk euphoria faded, with London also sliding as the British pound rallied on speculation over a possible Brexit delay.

Markets had hurtled higher on Monday after US President Donald Trump said he would delay a hike in tariffs on Chinese goods and described the two countries as being in “advanced stages” of negotiations towards a deal.

However, as the dust settled on Tuesday, doubts festered over whether Beijing and Washington can resolve their bitter trade war.

“Stocks have handed back some of yesterday’s gains as the optimism surrounding US-China trade relations has faded,” said CMC Markets analyst David Madden.

“It was a welcome relief that the US won’t be implementing higher tariffs on Chinese imports in March, but the trade spat is far from over — and investors are wondering: where do we go from here?”

Trump’s decision to waive this week’s deadline for China-US negotiations and his upbeat tone on their progress had lit a fire under equities Monday on hopes the long-running dispute could be nearing its end.

In London on Tuesday, sterling rose on a report that Prime Minister Theresa May was considering putting off the March 29 deadline for Britain to leave the European Union if she is unable to push her own deal through parliament, as she attempts to avoid a painful no-deal divorce.

In reaction, the pound leapt to $1.3238 — the highest level since October.

And the European single currency touched a 21-month peak at 85.88 pence per euro.

“The FTSE is losing ground ... as a stronger pound is hitting major industrials and a prospect of a delay in Brexit is adding to the uncertainty for businesses,” said City Index analyst Fiona Cincotta.

“Brexit tensions that have been building over the last couple of weeks with party defections and the formation of the group of independent MPs seem to have yielded some results.”

The stronger pound weighs on FTSE-listed multinationals whose earnings abroad are converted back into sterling.

Adding upside to sterling was the announcement by opposition leader Jeremy Corbyn that his Labour Party would support a second referendum on leaving the bloc if its own plan for Brexit is not approved.

Later on Tuesday, all eyes will be on Washington, where Federal Reserve boss Jerome Powell will face lawmakers, with his comments being pored over for clues about the central bank’s monetary policy plans.