* Strong earnings, prospect of U.S. tax cuts drive world stocks
* World equity index up nearly 2 pct this week, 8 pct in 2017
* Euro holds on to bulk of gains made after French vote
* Relief as Trump pulls back on Mexican border wall plan
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
By Abhinav Ramnarayan
LONDON, April 26 (Reuters) - World stocks hit a record high on Wednesday after strong earnings and the prospect of tax cuts for corporate America pushed U.S. shares to stratospheric levels and the euro held on to recent gains as political concerns in France ebbed.
European shares pulled back slightly from 20-month highs as some disappointing corporate results weighed on the market but Asian stocks powered ahead.
Against a strengthening dollar, the euro EUR= held on to the bulk of the gains made earlier this week; it fell 0.13 percent to $1.0911, but is still up 1.72 percent from Friday's close.
The gains earlier this week came after centrist Emmanuel Macron and far-right leader Marine Le Pen this weekend made it through to the second round of French presidential elections, considerably reducing the risk of a French exit from the single currency.
Against a backdrop of receding concern over the French presidential elections, U.S. President Donald Trump struck a conciliatory note and flagged tax cuts, boosting investor optimism and demand for risky assets. along with a strong set of earnings for U.S. companies for the first quarter pushed the MSCI world equity index .MIWD00000PUS , which tracks shares in 46 countries, up 0.1 percent to a fresh record high. It is up nearly 2 percent this week and 8.35 percent since the start of the year.
"On top of (the French election result) we have had a very decent set of corporate earnings in the U.S. and that helped push the market further along the same direction," said Investec economist Philip Shaw.
"I am unsure how further along we really are on the tax cutting agenda, but it is certainly not doing market sentiment any harm," he added.
Further details on President Trump's tax cutting plans are expected to be announced later on Wednesday, potentially reviving reflation bets.
The threat of a U.S. government shutdown this weekend also receded after Trump backed away from demanding Congress include funding for his planned border wall with Mexico in a spending bill.
The slew of positive news pushed the Nasdaq composite to a record high on Tuesday while the Dow and S&P 500 brushed against recent peaks. Treasury yields, meanwhile, rose above 2.30 percent for the first time in two weeks. US10YT=RR
"U.S. bond yields have broken higher without the support of commodity prices which is one of the clearest signs that the Trump trade is back," Morgan Stanley (NYSE:MS) analysts said in a note.
Oil prices LCOc1 resumed their downward trend on Wednesday as data showed a rise in U.S. crude inventories and record supplies in the rest of the world cast doubt on OPEC's ability to cut supplies and tighten the market. zone government bond yields nudged up ahead of Trump's keenly anticipated tax announcement.
Investors were also looking ahead to Thursday's policy meeting of the European Central Bank.
While no changes are expected, policymakers see scope for sending a small signal in June towards reducing monetary stimulus, according to sources, another factor underpinning the single currency. Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Editing by Toby Chopra)