World Bulletin / News Desk

European stock markets stalled Wednesday as investors girded themselves for what German Chancellor Angela Merkel called a "contentious" summit of Group of Seven nations later this week.

G7 leaders will descend on Quebec this Friday and Saturday for a summit dominated by world trade after US President Donald Trump slapped Canada, Mexico and the European Union with steel and aluminium tariffs.

German Chancellor Angela Merkel said she expected "contentious discussions" at the summit, given differences with  Trump on trade, climate and security.

In response to Trump's punitive tariffs on metals, both the EU and Mexico have announced retaliatory measures. 

Meanwhile, official data showed that the US trade deficit narrowed in April for second the straight month. 

The total trade deficit fell 2.1 percent for April to $46.2 billion after a downward revision for March. The result was better than analysts expected, since the consensus forecast called for an increase.

The stock markets were also looking ahead to monetary policy decisions next week by both the US Federal Reserve and the European Central Bank, analysts said.

"Although the Federal Reserve is almost certain to raise interest rates next week, it is the ECB which all of a sudden is looking to be the more anticipated meeting," said Forex.com analyst, Fawad Razaqzada.

"Don't get me wrong, there won't be any surprise rate hikes or anything. But top ECB policymakers have delivered hawkish remarks on the eurozone economy this week and this has led to some chatter that the central bank may announce its intension to end (quantitative easing) at the end of the year, as early as at the next week's meeting," he said. 

The ECB's chief economist Peter Praet saaid policymakers would discuss when to wind down the massive bond-buying scheme that has propped up the eurozone economy for the past three years. 

On currency markets, the dollar weakened against the euro, which was enjoying attention again after last week's sell-off fuelled by political turmoil in Italy and Spain.