GLOBAL MARKETS-Markets brace for crucial G20 signals

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* MSCI ACWI flat, set for best first half since 1997
* Trump-Xi meeting at G20 in focus
* Dollar set for weakest month since start of 2018
* Gold gains

By Ritvik Carvalho
LONDON, June 28 (Reuters) - Stocks eked out meagre gains on
Friday before a meeting on trade between U.S. President Donald
Trump and Chinese President Xi Jinping, capping gains on the
best first half for global equities since 1997.
After stock markets slipped in Asia, European shares were
higher, with the pan-European STOXX 600 .STOXX index up 0.27%
by midday in London. Germany's DAX index .GDAXI was the
biggest gainer, up 0.36% percent on the day. .EU
Trump and Xi will meet during a Group of 20 summit this
weekend in Osaka, Japan, for talks that could help resolve a
year-long trade war between China and the United States, as
signs proliferate of rising risks to global growth.
MSCI's All Country World Index .MIWD00000PUS , which tracks
shares in 47 countries, was up just 0.06% on the day, but
heading for its best first half since 1997.
The index was set to break a three-week streak of gains but
also on course for its best month since January, gaining nearly
6% in June as equities rallied after major central banks pivoted
towards easier monetary policy.
That shift came as trade negotiations between the United
States and China broke down earlier this year. Now markets are
betting on an interest rate cut by the U.S. Federal Reserve as
early as the next policy meeting in July.
On Thursday, China's central bank pledged to support a
slowing economy, before the release of data that is expected to
show China's factory activity slowed for a second consecutive
month in June. "Market participants are taking a cautious approach ahead of
this high-level meeting as hopes for a material breakthrough are
low," said Konstantinos Anthis, head of research at ADSS.
"This is a stellar opportunity for the two leaders to find
some common ground and unless they do so, equities will likely
push lower as a prolonged period of tariffs on each other's
exports will take a heavier toll on both economies and global
growth."
Futures indicated a positive open on Wall Street. ESc1
NQc1 .N
Currency markets also reflected caution, with the Japanese
yen JPY= reversing a three-day losing streak against the
dollar. FRX/
The U.S. currency was down 0.1% against a basket of other
currencies .DXY and set to turn in its weakest monthly
performance since the start of 2018. Bets on interest rate cuts
from the Fed have pushed the dollar index down 1.7% this month.
In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS fell 0.2%. Japan's Nikkei stock
index .N225 ended down 0.29%.
Chinese blue chips .CSI300 fell 0.24% on Friday and Hong
Kong's Hang Seng .HSI lost 0.32%. Australian shares .AXJO
shed 0.71%.
White House economic adviser Larry Kudlow said on Thursday
that Trump had agreed to no preconditions for the meeting with
Xi and is maintaining his threat to impose new tariffs on
Chinese goods.
Kudlow also dismissed a Wall Street Journal report that
China was insisting on lifting sanctions on Chinese telecom
equipment maker Huawei Technologies Co Ltd HWT.UL as part of a
trade deal and that the Trump administration had tentatively
agreed to delay new tariffs on Chinese goods. "People don't know what to think before the upcoming
meeting, so we're likely to see a lot of instability,
uncertainty and a general lack of direction, which will be
resolved only at the end of the weekend," said Josh Mahoney,
market analyst at IG in London.
"I'd err on the side of caution. We aren't going to see a
major breakthrough on trade but maybe we will see plans for
further discussions down the line and that in itself could give
some sort of boost to markets to say it's not necessarily over
quite yet."
Elsewhere, euro zone government bond yields hovered near
record lows in many cases before the release of inflation data
for the bloc. Expectations are for inflation of 1.2% in June --
short of the European Central Bank's target of just below 2% --
so investors held on to government bonds in early trade.
GVD/EUR
In commodity markets, trade worries continued to weigh on
oil. Benchmark Brent crude LCOc1 was down 0.05% to $66.52 per
barrel. O/R
The weak dollar and uncertainty over trade saw gold recover
after dipping below $1,400 per ounce on Thursday. Spot gold
XAU= was last traded at $1,413.81 per ounce, up 0.33%, but
down from earlier highs. GOL/