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GLOBAL MARKETS-Stocks cling to gains on trade hopes, mixed earnings weigh on Europe

Credit: REUTERS/RALPH ORLOWSKI

World stocks hovered near a 15-month high on Tuesday underpinned by cautious optimism over a Sino-U.S trade deal and expectations of another dose of policy stimulus from the Federal Reserve, with safe havens such as gold and yen on the back foot.

By Karin Strohecker

LONDON, Oct 29 (Reuters) - World stocks hovered near a 15-month high on Tuesday underpinned by cautious optimism over a Sino-U.S trade deal and expectations of another dose of policy stimulus from the Federal Reserve, with safe havens such as gold and yen on the back foot.

A mixed bag of earnings offset some of the chipper mood on European bourses, with the pan-regional STOXX 600 snapping a six-day losing streak to ease 0.4% and Germany's DAX index .GDAXI easing 0.2%..EU

The losses in Europe followed a mixed performance in Asia, where Japan's Nikkei .N225 rose 0.4% to reach levels last seen a year ago. Shanghai blue chips .CSI300 dithered either side of flat.

U.S. President Donald Trump said on Monday he expected to sign a significant part of a trade deal with China ahead of schedule but did not elaborate on the timing.

The U.S. trade representative also said Washington was studying whether to extend tariff suspensions on $34 billion of Chinese goods set to expire on Dec. 28.

But analysts cautioned that trade tensions were far from over.

"It isn't yet clear that an interim deal that kicks trade worries down the road would be sufficient to allay concerns about the geopolitical, economic, earnings, and policy backdrop," Mark Haefele, CIO at UBS Global Wealth Management.

"President Trump's announcement of a Chinese commitment to buying $40–50 billion of U.S. agricultural products appears unrealistic – U.S. exports to China peaked at just $26 billion in 2012, when prices were much higher."

U.S. futures ESc1, NQc1 pointed to a mixed open on Wall Street after Monday's rally that saw the S&P 500 .SPX gain 0.56% to a record closing peak and the Dow .DJI rise 0.49% and the Nasdaq .IXIC 1.01%. .N

Microsoft Corp MSFT.O climbed 2.46% in late NY trade after winning the Pentagon's $10 billion cloud computing contract, beating out Amazon.com Inc AMZN.O.

Google parent Alphabet Inc GOOGL.Omeanwhile slipped after missing analysts' estimates for quarterly profit even though revenue growth topped expectations.

WAIT AND SEE

With markets in wait and see mode for Fed and trade developments, bond yields inched lower. Germany's benchmark 10-year bond yield hovered just below three-month highs hit on Monday, when yields across the single currency bloc rose sharply after the European Union granted Britain a Brexit extension.

Yields on two-year Treasury notes were treading water after US2YT=TWEB hitting four-week highs on Monday at 1.668%. US/

Investors are still looking forward to a likely rate cut from the Federal Reserve on Wednesday, though the outlook was less clear beyond that.

"We expect the Federal Reserve will cut rates this week and possibly once next year, as insurance against a broad economic slowdown," BlackRock's chief fixed income strategist, Scott Thiel, said in a note to clients.

The futures market has 50 basis points of cuts priced in by June FEDWATCH.

Central banks in Japan and Canada also meet this week, with talk the former might ease further if only to prevent an export-sapping bounce in its currency.

The shift from safe harbours saw the yen weaken slightly, with the dollar standing at 108.89 yen JPY=after having reached its highest in three months. It was eyeing a key technical level at 109.31.

The euro edged up to $1.1095 EUR= and was little changed against a basket of currencies at 97.782 .DXY.

The British pound GBP=D3meanwhile fell towards a 10-day low, nearing $1.28 against a broadly stronger greenback as investors waited for Prime Minister Boris Johnson's next attempt to push for a general election before the end of the year.GBP/

Spot gold hovered at $1,493 per ounce XAU=, after having pulled away from last week's top around $1,517.

Oil prices were pressured by signs of rising U.S. crude stock piles. O/R

Brent crude LCOc1 futures slipped 45 cents to $61.12 a barrel, while U.S. crude CLc1 lost 53 cents to $55.28.

Asia stock marketshttps://tmsnrt.rs/2zpUAr4

Asia-Pacific valuationshttps://tmsnrt.rs/2Dr2BQA

Trump: 'ahead of schedule' on China trade deal

U.S. may extend tariff suspensions on $34 billion in Chinese goods

Microsoft beats Amazon for Pentagon's $10 bln cloud computing contract

Google's search for sales in cloud, hardware clip Alphabet profit

EU agrees Brexit delay as British parliament blocks December election

(Reporting by Karin Strohecker, additional reporting by Wayne Cole in Sydney; Editing by Nick Tattersall)

((karin.strohecker@thomsonreuters.com; +442075427262; Reuters Messaging: karin.strohecker.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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