London's benchmark FTSE 100 index bucked the trend as it was on course to close at a record high after weak UK unemployment data raised chances the Bank of England will cut interest rates into next year.

"US-China trade talks are the main focus for investors," noted Neil Wilson, UK investor strategist at Saxo Markets.

"A good outcome could send Wall Street to a fresh record high" when trading resumes Tuesday, he added.

The world's two biggest economies are holding a second day of trade talks in London, seeking to shore up a shaky tariff truce in a bitter row deepened by export curbs.

One of US President Donald Trump's top advisers said he expected "a big, strong handshake" at the end of the discussions.

Trump told reporters at the White House: "We are doing well with China. China's not easy.

"I'm only getting good reports."

The agenda is expected to be dominated by exports of rare earth minerals used in a wide range of things including smartphones, electric vehicle batteries and green technology.

"Investors remain on tenterhooks as talks between the US and China spill over to today, with a nuanced situation yet to be resolved," said Richard Hunter, head of markets at Interactive Investor.

"For the time being, the pause in tariff hostilities is a positive starting point as the US seeks the restoration of rare earth mineral exports from China which would inevitably result in a mutual relaxation."

Investors are awaiting also key US inflation data this week, which could impact the Federal Reserve's monetary policy.

Analysts warn Trump's tariffs will refuel inflation, strengthening the argument to keep interest rates on hold instead of lowering them.

The Fed faces pressure from the president to cut rates, with bank officials due to make a decision at their policy meeting next week.

While the Bank of England is expected to pause on rates at its next meeting this month, analysts now see it cutting on at least two occasions this year and again in early 2026 after Tuesday's jobs data, which also showed slowing wages growth.

News of dampened inflationary pressure weighed heavily on the pound, boosting the London stock market, which has benefitted this year from the UK government striking post-Brexit trade agreements with the US and India.

Prime Minister Keir Starmer's Labour administration has managed also to shield Britain against Trump's most severe tariff rates.

- Key figures at around 1100 GMT -

London - FTSE 100: UP 0.4 percent at 8,869.51 points

Paris - CAC 40: DOWN 0.1 percent at 7,782.46

Frankfurt - DAX: DOWN 0.5 percent at 24,060.83

Tokyo - Nikkei 225: UP 0.3 percent at 38,211.51 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 24,162.87 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,384.82 (close)

New York - Dow: FLAT at 42,761.76 (close)

Euro/dollar: UP at $1.1424 from $1.1420 on Monday

Pound/dollar: DOWN at $1.3498 from $1.3552

Dollar/yen: UP at 144.63 yen 144.60 yen

Euro/pound: UP 84.62 pence from 84.27 pence

Brent North Sea Crude: UP 0.5 percent at $67.37 per barrel

West Texas Intermediate: UP 0.5 percent at $65.62 per barrel

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