LONDON: European stock markets edged higher on Tuesday, while the pound hit the lowest level versus the dollar in more than two years on Brexit deadlock.

Wall Street provided another record-breaking lead for stocks, as an expected Fed interest rate cut continues to fuel optimism, while top Chinese and US negotiators plan to hold trade talks over the phone this week.

Asian equities closed mixed however on Tuesday, with investors taking a breather after a recent rally and as they awaited the start of the US corporate earnings season.

In London, shares in Burberry shot up 13 percent to £22.49 after the British luxury fashion house reported a rise in first-quarter sales on strong growth in China and thanks to a Brexit-fuelled weak pound enticing Asian tourists to snap up its goods during trips to the UK.

"First quarter sales are better than expected thanks to a positive customer response to a new collection by chief designer Riccardo Tisci, as well as decent business in Asia," noted Russ Mould, investment director at AJ Bell.

The pound meanwhile continued to suffer on Tuesday despite data confirming low UK unemployment.

Sterling slumped to $1.2408, the lowest level since April 2017.

The euro climbed to 90.42 pence, which was the European single currency's highest level versus sterling since January.

"Unfortunately, traders are finding it hard to look past no-deal risks or at the very least a delay and hard Brexit, which continues to weigh on the currency," said Craig Erlam, senior market analyst at Oanda trading group.

Official data Tuesday showed Britain's unemployment rate at 3.8 percent in April, the lowest level since 1974.

Markets were meanwhile looking ahead to the start this week of the US earnings seasons, with the likes of JPMorgan Chase, Netflix and Johnson & Johnson among the big names reporting.

Profits were expected to be broadly lower owing largely to a global slowdown and trade war between the US and China.

JPMorgan nonetheless reported a jump in second-quarter profits owing to strength in its consumer and business banking divisions, and was upbeat on the US economic outlook.

US Treasury Secretary Steven Mnuchin on Monday said that top American and Chinese trade negotiators were due to speak by telephone in the coming days, but no face-to-face talks have been scheduled yet.

Dealers are also keeping an eye on Beijing to see if it unveils any economic stimulus as data on Monday showed second-quarter growth at its weakest pace for almost three decades.

"We are concerned about complacency as investors seem to believe the Fed will save the day, the US-China trade dispute will be resolved relatively soon and massive China stimulus will boost global growth," said Bob Doll at Nuveen Asset Management.

"We think this combination is a tall order. As a result, market risks lean more to the downside." —AFP