The pound meanwhile suffered after Trump warned Prime Minister Theresa May's EU divorce agreement could hamper the chances of a trade deal between  Washington and London.

Oil prices steadied after recent extreme volatility, while bitcoin stabilised around $3,650.

Monday witnessed a global markets rally, fuelled by rising oil prices, Italy's softer tone in its budget standoff with Brussels and May's Brexit
agreement with the European Union.

"A strong, sharp move higher in global equities faded almost as quickly as
it occurred... in what is a clear sign of the growing sensitivity to this
(trade) matter heading into the G20 meetings later this week in Buenos Aires," noted David Cheetham, chief market analyst at traders XTB.

"Comments from US President Trump... that downplayed the chances of a US-UK trade deal after Brexit have no doubt not helped the pound's plight," Cheetham said, adding that further pressure was coming from May's struggle to have the Brexit deal approved by the UK parliament.

Elsewhere, traders are looking to see if China and the US will be able to
work out an agreement that brings them back from the brink of a tariffs row
that threatens to dent global growth.

In a paper published Tuesday, European Central Bank researchers said that while rising protectionism's impact on stocks and bonds has been "contained", a global trade war risks "strong financial market corrections".  

While the Trump-Xi meeting is the main event this week, investors are also
keeping an eye on speeches from top Federal Reserve officials including boss Jerome Powell, which could signal a softer pace of interest rate hikes.

Rising US borrowing costs -- fuelled by surging US growth -- have been a
major cause of concern for investors but recent comments from the central
banker appear to show a more dovish outlook for 2019 as the global economy slows.

As business got under way in Europe the pound dropped against the dollar and euro following Trump's comments about May's draft Brexit deal.

"Sounds like a great deal for the EU," he said at the White House Monday."You know, right now, if you look at the deal, they may not be able to trade with us, and that wouldn't be a good thing," he added.

On oil markets, both main contracts remained under pressure despite Monday's sharp rebound, with market-watchers waiting for next month's gathering of OPEC and non-OPEC members hoping they will announce a cut in output.

The commodity has been hammered since early October by a series of issues including the uncertain global outlook, the trade war, rising supplies, slowing demand and weakness in China.

As trade tensions begin to bite on the global economy, analysts are predicting slower growth into next year, meaning there would be less demand for oil.

"It has been our long-held view that slower global economic activity would be a factor weighing on oil demand in 2019 and that the market would move into surplus," London-based research consultancy Capital Economics said.