Caution prevailed across major markets on Wednesday before a potentially tense meeting between US President Donald Trump and his Chinese counterpart Xi Jinping later this week, although metals and oil prices firmed on hopes of better global demand.

Market participants will also see the release of minutes from the last US Federal Reserve meeting in which the central bank decided to raise interest rates.

Overnight, Richmond Federal Reserve President Jeffrey Lacker abruptly left the US central bank after admitting that a conversation he had with a Wall Street analyst in 2012 may have disclosed confidential information about Fed policy options.

The dollar lost its grip on earlier gains as concerns over a North Korean missile test worsened sentiment ahead of the summit between the US and Chinese leaders.

Topping the agenda at Trumps Mar-a-Lago resort in Florida will be whether he makes good on his threat to use US-China trade ties to pressure Beijing to do more to rein in its nuclear-armed neighbour North Korea, which is working to develop missiles capable of hitting the United States.

The dollar index, which tracks the US currency against a trade-weighted basket of six peers, was down on the day at 100.48, as slumping US Treasury yields also gave investors little incentive to buy dollars.

“The meetings are expected to be informal, unscripted discussions of how the two countries will address, but not immediately resolve, their differences,” said strategists at Morgan Stanley in a note to clients.

“Any commentary on how the US specifically wants to try to reduce the trade deficit with China will be watched by FX investors,” the strategists wrote.

European stocks were little changed on the day as the cautious start to the second quarter continued. Oil and mining-related stocks were outperformers, lured higher by firmer commodities prices.

Oil climbed to a near one-month high on signs of a gradual tightening in global oil inventories and on concern about a supply outage at a field in the United Kingdom's North Sea that feeds into an international benchmark price.

Brent crude futures, the international benchmark for oil, were up 1 per cent at $54.73 per barrel. US West Texas Intermediate (WTI) crude futures was also up 1 per cent.

London copper rallied as Chinese traders returned from a two-day break to buy up metals following brighter global manufacturing reports. Zinc and nickel tracked a rally in steel.

Related Topics