European equities falter as Lagarde warns on protectionism

London, United Kingdom:  Europe's major stock markets faltered on Wednesday after IMF chief Christine Lagarde waded into the US-China trade spat to warn that protectionist trade policies would undermine global growth.

Frankfurt, London and Paris slid after Asian equities flitted between gains and losses, with hopes that a China-US trade war will be averted providing some support.

In a thinly-veiled warning to US President Donald Trump -- who has locked horns with China on trade -- International Monetary Fund boss Lagarde said Wednesday that countries should open trade further by reforming their own domestic practices rather than putting up new barriers to trade.

'Steer clear'

Governments "need to steer clear of protectionism in all its forms," Lagarde urged, adding that the "system of rules and shared responsibility is now in danger of being torn apart".

And she said it was a mistake to view trade deficits as a sign of unfair trade practices -- as Trump has repeatedly claimed, most notably in the current dispute with China.

"The generally-accepted wisdom that trade wars tend not to have a happy ending for all concerned has been echoed by Christine Lagarde," Interactive Investor analyst Richard Hunter told AFP.

"This provides further evidence that investors are hoping for a negotiated resolution between the powerhouses of China and the United States."

Chinese President Xi Jinping had soothed world markets on Tuesday with a conciliatory speech pledging to further open up the world's number two economy, ease auto tariffs and take action on US intellectual property rights.

The measures address some of the key issues that have irked Trump and came after the White House on Friday unveiled another round of levies on billions of dollars of Chinese goods.

His comments tempered worries about a potentially devastating trade war that could hammer the global economy just as it gets back on track after the financial crisis.

Trump tweeted that he was "Very thankful for President Xi of China's kind words", adding "We will make great progress together!"

Music to investors' ears?

The Xi speech also followed a series of tit-for-tat threats by the US and China to impose retaliatory tariffs on one another that have rattled markets in recent weeks.

"In a market starved of good news, Xi's dialled back trade war rhetoric was music to investors' ears," said Stephen Innes, head of Asia-Pacific trading at OANDA.

Meanwhile, Wall Street provided a strong lead overnight, with all three main indexes up around two percent but regional dealers took a breather.

Investor attention is turning to the corporate earnings season, which is about to get under way.

World oil prices meanwhile held firm ahead of the release of weekly US stockpiles figures.

The market had surged Tuesday on easing trade worries as well as geopolitical concerns as Western governments consider their response to an alleged chemical attack in Syria, while the US is also toying with slapping Iran with sanctions.