(Adds U.S. futures, details, updates prices throughout)
* World stocks up 0.5% as Europe rallies, Wall St futures up
* Pound up 1% after PM Johnson's setback in parliament
* Italy bond yields hit new lows on prospect of new govt
* Sentiment helped as Hong Kong kills extradition bill
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Danilo Masoni
MILAN, Sept 4 (Reuters) - Britain's pound bounced from
three-year lows on Wednesday after a parliamentary vote raised
the prospect of another delay to Brexit, while an easing of
worries about political risk in Italy helped push world stocks
higher.
Global stocks .MIWD00000PUS rose 0.5% by 1232 GMT, as
Europe .STOXX rallied 0.9% after a positive session in Asia
following a report showing that growth in China's service sector
accelerated despite broader economic headwinds.
Hong Kong's withdrawal of an extradition bill that triggered
months of unrest, throwing the Chinese-ruled city into its worst
crisis in decades, also caused big relief.
Hong Kong's main share index .HSI surged nearly 3.9%,
scoring its biggest one-day gain since Nov. 2018, while in
Europe, Asia-exposed banks and luxury stocks rose sharply.
U.S. futures ESc1 also pointed to a strong Wall Street
start, as the encouraging data from China and global political
news helped offset worries over growth and trade that caused
losses on Tuesday.
British lawmakers defeated Boris Johnson on Tuesday in a bid
to prevent him taking Britain out of the European Union without
a divorce agreement, prompting the prime minister to demand a
Oct. 15 snap election. On Wednesday they will seek to pass a law forcing Johnson to
ask the European Union to delay Brexit until Jan. 31 from Oct.
31 unless he has an exit deal approved by parliament beforehand.
UK developments lifted the pound 1% to above $1.22 GBP=D3
for the first time since Aug.30 after sliding on Tuesday to its
lowest since October 2016.
"The road from here is likely to be very tricky, especially
if PM Boris Johnson takes the path towards a snap election,"
said Hussein Sayed, Chief Market Strategist at FXTM.
"However, Mr. Johnson needs at least two-thirds of MPs to
vote in favour of one, and so far, the Labour party doesn't seem
willing to take this risk. If the opposition party manages to
get Brexit delayed in the outcome of no deal, we can see
sterling recover further from here," he added.
Elsewhere in currency markets, the dollar index .DXY
against a basket of six major currencies fell to 98.616 after
rising overnight to 99.370, its highest level since May 2017.
The index started to lose ground on Tuesday after data
showed the U.S. manufacturing sector contracted in August for
the first time since 2016, a reading that in turn has cemented
expectations of further policy easing by the Federal Reserve.
The euro rose to $1.0987 EUR= after sliding to a 28-month
low of $1.0926 overnight, boosted by the weaker dollar and after
some European policymakers introduced doubt over the scale of a
ECB stimulus package expected next week. YIELDS AT NEW LOWS
In Italy, members of the anti-establishment 5-Star Movement
backed a coalition deal with the centre-left Democratic Party on
Tuesday, opening the way for a new government to take office the
coming days.
As a result, 10-year Italian government bond yields
IT10YT=RR hit 0.803%, a new record low, while Italian banks
.FTIT8300 , another proxy for political risk in the country,
rallied 2%.
"The next hurdle for the government will be the confidence
vote in Parliament. But at the moment risks appear limited,"
said Giuseppe Sersale, fund manager at Anthilia Capital.
Political concerns and expectations of further easing
measures by central banks have been squeezing bond yields
globally but the return of risk appetite on Wednesday on the
back of political developments in Europe and upbeat economic
data from China triggered a rebound.
After falling to a fresh record low on Tuesday, yields on
the safe-haven 10-year German Bund DE10YT=RR jumped to their
highest level in over a week, while the yield on the 10-year
U.S. Treasury US10YT=RR rose to 1.497% after hitting its
lowest since July 2016 in the previous session in light of the
weak ISM U.S. factories reading.
In commodities, oil prices rose, as the positive China data
helped them recover from a nearly one-month low on fears over
the weakening global economy. O/R
Brent crude LCOc1 was up 59 cents at $59.21 a barrel,
while U.S. West Texas Intermediate futures CLc1 gained 94
cents at $54.87 at barrel.
London copper prices CMCU3 rebounded from a two-year low
and gold prices XAU= dipped as political concerns in Europe
and Asia eased, improving risk appetite. MET/L GOL/
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