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GLOBAL MARKETS-Stocks gain on hopes of trade deal, Fed cut

Published 29/10/2019, 12:00 am
© Reuters.  GLOBAL MARKETS-Stocks gain on hopes of trade deal, Fed cut

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Focus turns to Fed decision

* Trade deal hopes buoy stocks

* EU approves Brexit extension to 31 Jan 2020

By Ritvik Carvalho

LONDON, Oct 28 (Reuters) - World shares rose to three-month highs on Monday, boosted by hopes for a trade deal and strong U.S. corporate earnings, while the dollar dipped from its highest in a week before a Federal Reserve rate decision.

MSCI's All Country World Index .MIWD00000PUS , which tracks shares across 47 countries, was up 0.1% on the day and at its highest level since July 25.

European shares climbed to their highest since February 2018, helped by trade-exposed auto and mining stocks. The pan-European STOXX 600 index .STOXX was up 0.1% by 1237 GMT. pound edged up after the European Union agreed to extend the deadline for Brexit until Jan. 31, 2020. It last traded 0.1% higher at $1.2844. GBP/

Euro zone bond yields rose after the decision. GVD/EUR

"The market reaction is fairly muted as the extension was widely expected. If anything, the market should be encouraged, as another potential event risk has been removed in the short term," said Marija Veitmane, senior strategist at State Street (NYSE:STT) Global Markets.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5% to its highest since late July, for a third straight day of gains.

The CSI300 .CSI300 of blue-chip mainland China shares was up 0.8%. Hong Kong's Hang Seng index .HSI jumped as much as 1.0%. Japan's Nikkei .N225 rose 0.3% to a one-year high. The advances came after U.S. and European markets gained on Friday.

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"Markets are likely to enter a standby mode ahead of the Fed's rate decision on Wednesday amid ongoing developments in the China-US trade negotiations and the corporate earnings season," Danske Bank said in a research note.

U.S. and Chinese officials are "close to finalising" some parts of a trade agreement after high-level telephone discussions on Friday, the U.S. Trade Representative's office and China's Commerce Ministry said, with talks to continue. President Donald Trump has said he hopes to sign the deal with China's President Xi Jinping next month at a summit in Chile.

The protracted trade war between the world's largest economies has hurt manufacturing, exports and business confidence globally and hurt the profits of many major industrial firms.

Optimism that Beijing and Washington were close to resolving their dispute led the S&P500 .SPX to surpass its July 26 closing record of 3,025.86, though it ended just below that on Friday. The S&P 500's total return index .SPXT posted an all-time high.

E-mini futures for the S&P 500 ESc1 were up 0.3% to a record high.

Strong results from companies including Intel INTC.O also boosted sentiment in equities markets. More than 81% of U.S. companies have beaten Wall Street expectations so far this earnings season, despite concerns about the trade war.

Investors next await earnings from the likes of Alphabet Inc GOOGL.O , Apple AAPL.O , Facebook FB.O and Exxon (NYSE:XOM) XOM.N .

Activity later in the week will be dominated by the U.S. Federal Reserve, which markets expect will lower interest rates at its Wednesday meeting. Futures show a 90% probability of a cut. /IRPR

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The Bank of Japan meets on Thursday. On Friday, indicators for Chinese and U.S. manufacturing will be released.

"The outcome of the FOMC (Federal Open Markets Committee) policy meeting will most likely draw the largest market reaction," said Richard Grace, Sydney-based chief currency strategist at Commonwealth Bank.

"We also think the risk is the FOMC will articulate a pause," for future rate decisions, Grace added.

In currencies, the dollar index .DXY was 0.1% lower against a basket of six major peers. The euro EUR=D3 was up 0.1% to $1.1109.

Oil prices fell after strong gains last week, as data released in China reinforced signs that its economy is slowing O/R

U.S. crude CLcv1 slipped 0.3% to $56.48 a barrel. Brent LCOcv1 fell 0.3% to $61.85.

Spot gold XAU= fell 0.2% to $1,500.84 an ounce. GOL/

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