* European stocks boosted by Q3 earnings
* But still set for worst week in a month
* Britain, EU meet for Bexit talks
* U.S. debate creates few surprises
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Tom Arnold
LONDON, Oct 23 (Reuters) - European shares rallied on Friday, buoyed by positive earnings, but gains were limited by investor caution less than two weeks before the U.S. presidential election and with conflicting signs of progress in stimulus talks in Washington.
The final debate between U.S. President Donald Trump and his Democratic challenger Joe Biden on Thursday offered few surprises and little new direction. stocks .STOXX were up 1%, heading for their best day in five trading sessions, but still set for their worst week in a month. Strong third-quarter results offset key business survey data showing patchy recoveries in Germany and France. main stock index .FTSE rose 1.5% in its best day since early September after Barclays BARC.L reported stronger-than-expected third-quarter earnings and last month's British retail sales beat expectations. chief negotiators for Britain and the European Union meet on Friday for talks on a last-gasp trade deal to avert a tumultuous finale to the five-year Brexit crisis. S&P 500 futures ESc1 were up 0.3%, after dipping following the debate where Biden again criticized Trump's handling of the coronavirus pandemic and Trump levelled unfounded corruption accusations at Biden and his family.
The underlying index had gained about 0.5% the day before on hopes the U.S. Congress and the White House would soon strike a deal on another round of COVID-19 stimulus.
"There is no reason for markets to take big long positions as we have the election in less than 10 days," said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners. "Combined with COVID-19 uncertainty it's a time where people will take a step back and wait for election developments before taking a bet on the markets."
In Asia-Pacific, MSCI's broadest index of the region's shares outside Japan .MIAPJ0000PUS was flat, while Japan's Nikkei .N225 ticked up 0.2% and the CSI300 index of mainland China .CSI300 shed 1.3%.
The MSCI world equity index .MIWD00000PUS , which follows shares in nearly 50 countries, was up 0.2%, but set for its biggest weekly fall in a month.
Biden's widening lead in polls is prompting many investors to bet on his presidency and a "blue sweep", where Democrats win both chambers of Congress.
While Democrats' plans to raise corporate and capital gains taxes could hit share prices, their promise of large stimulus is seen as mitigating the impact.
Clean energy is seen as a potential winner at the expense of conventional energy under Biden, who has pledged to target net-zero emissions by 2050. The Dow Jones oil and gas index .DJUSEN is down nearly 49% this year.
The Nasdaq index .IXIC , which had led the market's rally this year, has underperformed lately, losing 1.4% so far this week, on concern Democrats will take a harder stance on big tech firms.
Expectations of bigger government stimulus have also boosted U.S. borrowing costs. The 10-year U.S. Treasuries yield US10YT=RR hit a four-and-a-half-month high of 0.870% on Thursday and last stood at 0.865%.
U.S. House of Representatives Speaker Nancy Pelosi reported progress in talks with the Trump administration for another round of financial aid, but Senate Republicans remained skeptical of a possible deal. the euro zone, Italian 10-year bond yields dropped 4 basis points to 0.767% as investors seemed confident an S&P Italy ratings review late on Friday will not lead to a downgrade. currency markets, the dollar was 0.2% lower against a basket of currencies =USD early in Europe, shy of a seven-week low hit on Wednesday.
The euro EUR= ticked up 0.3% against the dollar, as was sterling at $1.3084. Chinese yuan CNY= also held its ground against the dollar after an official at China's foreign exchange regulator said it has been more stable than expected, suggesting authorities are not too worried about its recent rise. prices gained. O/R Brent futures LCOc1 added 0.5% to $42.68 per barrel. U.S. crude futures CLc1 gained 0.5% to $40.84 per barrel.
Spot gold XAU= rose 0.4% to $1,911.14 per ounce. GOL/
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http://tmsnrt.rs/2jvdmXl Global currencies vs. dollar
http://tmsnrt.rs/2egbfVh Emerging markets
http://tmsnrt.rs/2ihRugV MSCI All Country Wolrd Index Market Cap
http://tmsnrt.rs/2EmTD6j
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