A gauge of global stock markets fell on Tuesday as the latest round of US-China trade talks began amid a threat from President Donald Trump, while concerns over a no-deal Brexit continued to drag the British currency lower. Trump warned China against waiting out his first term in office before finalising a trade deal, saying if he wins re-election in the November 2020 presidential contest, the outcome could be no agreement or a worse one.

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Traders are also bracing for the Federal Reserve`s policy announcement on Wednesday, for which markets have already fully priced in a quarter of a percentage point cut. A 50 basis-point cut has a 1-in-5 chance, according to futures markets.

"If not for trade policy, we would not be using monetary policy in the way we are using it now," said Art Hogan, chief market strategist at National Securities in New York. 

"The real conundrum is if, in fact, the Fed cuts rates because they are seeing a global economic slowdown and no real inflation, then the administration becomes emboldened to fight this battle longer."

Major Wall Street stock averages were little changed. The Dow Jones Industrial Average rose 1.11 points, or 0%, to 27,222.46, the S&P 500 lost 4.1 points, or 0.14%, to 3,016.87 and the Nasdaq Composite dropped 1.67 points, or 0.02%, to 8,291.66.

The broadside against China by Trump weighed on European indexes, along with underwhelming forecasts from German giants Bayer and Lufthansa .

The pan-European STOXX 600 index lost 1.47% and MSCI`s gauge of stocks across the globe shed 0.28%. Emerging market stocks lost 0.19 percent. MSCI`s broadest index of Asia-Pacific shares outside Japan closed 0.06 percent lower, while Japan`s Nikkei rose 0.43 percent.

In currencies, sterling continued to stumble against the dollar after suffering its biggest decline in eight months on Monday. Prime Minister Boris Johnson promised on Tuesday to lead Britain out of the European Union on Oct. 31 "no matter what."

Many investors say a no-deal divorce from the EU would tip Britain into a recession and inject unwanted uncertainty into financial markets.

The pound fell to as much as $1.2121, its lowest since March 2017 and was last trading at $1.2168, down 0.40% on the day.

"Sterling is moving due to local political developments - most importantly the idea that Prime Minister Johnson may not want to meet European leaders unless they change their position, which is a more hard line stance than the market would have expected as recently as a week ago," said Shahab Jalinoos, global head of foreign exchange strategy at Credit Suisse in New York.

The dollar index, tracking the greenback against six major currencies, rose 0.01%, with the euro up 0.08% to $1.1153. U.S. Treasury yields rose ahead of the Fed announcement, after data showed consumer confidence rebounded in July to its strongest level since November. 

Benchmark 10-year notes last fell 3/32 in price to yield 2.0649%, from 2.055% late on Monday. Among commodities, crude oil prices climbed as the Fed rate cut anticipation boosted demand expectations, but further price action hinges on the Fed`s language. 

"If the language we get from the Fed in post-meeting comments is on the conservative, rather than accommodative side, the U.S. dollar is likely to continue to remain strong and continue to present a headwind for an advance in oil," Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.

U.S. crude rose 2.18% to $58.11 per barrel and Brent was last at $64.75, up 1.63% on the day.Spot gold added 0.3 percent to $1,430.66 an ounce. Copper lost 1.33 percent to $5,938.00 a tonne.