* Focus turns to Fed decision
* EU approves Brexit extension to 31 Jan 2020
* Dollar weak on trade optimism, before Fed meeting
* Gold eases; Treasury yields rise (New throughout, updates to U.S. afternoon trading)
By Saqib Iqbal Ahmed
NEW YORK, Oct 28 (Reuters) - An index of global stock markets climbed to a 21-month high on Monday, boosted by growing hopes for a U.S.-China trade deal and the view that the U.S. Federal Reserve this week will deliver its third interest rate cut for 2019.
U.S. Treasury yields rose after the European Union agreed to a three-month flexible delay of Britain's departure. Improved risk sentiment also sapped demand for the safe-haven U.S. dollar, the Japanese yen and gold.
MSCI's All Country World Index .MIWD00000PUS , which tracks shares across 47 countries, was up 0.48% to its highest intraday level since Feb. 2, 2018.
U.S. and Chinese officials are "close to finalizing" 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. The USTR provided no details on areas of progress. President Donald Trump has said he hopes to sign the deal with China's President Xi Jinping next month at a summit in Chile.
"Most of the things that have been worrying markets haven't necessarily been resolved but the concern about them has waned a little bit," said Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin.
Strong results from U.S. companies have boosted risk sentiment, and investors are hopeful the Fed will cut interest rates at its meeting this week.
On Wall Street, the S&P 500 hit a record high. Microsoft Corp MSFT.O shares boosted all three main indexes, after the tech giant beat Amazon.com Inc AMZN.O for the Pentagon's $10 billion cloud computing contract. Dow Jones Industrial Average .DJI rose 137.5 points, or 0.51%, to 27,095.56, the S&P 500 .SPX gained 18.24 points, or 0.60%, to 3,040.79 and the Nasdaq Composite .IXIC added 85.78 points, or 1.04%, to 8,328.90.
The pan-European STOXX 600 index .STOXX rose 0.25% to close at its highest since January 2018, helped by trade-exposed auto and mining stocks.
In currency markets, the U.S. dollar slipped as trade deal optimism reduced demand for safe haven currencies.
"Positive trade headlines continue to support our view that trade tensions are easing," said Win Thin, global head of FX strategy at Brown Brothers Harriman.
The dollar index .DXY , which measures the greenback against a basket of six major currencies was 0.07% lower on the day.
Sterling GBP= rose 0.27% after the European Union granted Britain a three-month extension to exit the bloc. Expectations of a delay were largely priced in. benchmark 10-year U.S. Treasury yield US10YT=RR was last up 5 basis points to 1.851%. prices eased after four days of gains as worries about weak Chinese industrial data offset hopes oil demand will rise on a Sino-American trade deal. crude LCOc1 settled down 45 cents, or 0.7% at $61.57 a barrel, while U.S. West Texas Intermediate crude CLc1 settled 85 cents, or 1.5%, lower at $55.81.
Gold eased as trade hopes limited gains after the precious metal jumped 1% in the previous session. Spot gold XAU= was down 0.92% at $1,490.51 per ounce. Graphic: World FX rates in 2019
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