GLOBAL MARKETS-Shares rise as trade optimism muffles impeachment noise

* MSCI's world equity index flat after erasing losses
* Trump impeachment talk adds to geopolitical risk
* U.S.-China trade optimism boosts Europe
* But investors see major deal in October unlikely
* Dollar flat, euro at more than 2-year lows
* Wall Street futures up 0.3%
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates prices, adds sterling fall, euro zone inflation
expectation)
By Tom Wilson
LONDON, Sept 27 (Reuters) - World shares erased losses on
Friday, buoyed by a wave of optimism that U.S.-China trade
tensions might be easing as markets largely brushed off concerns
about possible impeachment moves against U.S. President Donald
Trump.
MSCI's world equity index .MIWD00000PUS , which tracks
shares in 47 countries, reversed earlier losses and was trading
flat by 1120 GMT. It was still heading towards its worst weekly
performance since mid-August, though.
Europe's STOXX 600 index .STOXX fared better, adding 0.5%
as London's bourse outperformed on a weaker pound and hopes grew
of progress towards resolving the trade war. Wall Street futures
also suggested a bright start for U.S. markets, gaining around
0.3%. ESc1 NQcv1
Investors focused on a whistleblower report that said Trump
abused his office in trying to solicit Ukraine's interference in
the 2020 U.S. election for his political benefit, and that the
White House tried to "lock down" evidence about that conduct.
The report came after the speaker of the U.S. House of
Representatives Nancy Pelosi this week launched an impeachment
inquiry into Trump, who has denied wrongdoing.
However, chances of his being removed from office look slim
given that the Republicans control the Senate, where any
impeachment trial would be held. "What we are waiting to see is how this might impact the
U.S.-China trade negotiations," said Hugh Gimber, global market
strategist at J.P. Morgan Asset Management.
"It's that combination this week of weakening economic data
and rising political uncertainty that has caused some tricky
periods in markets."
Earlier in the day, Asia-Pacific shares outside Japan
.MIAPJ0000PUS had been buffeted by the political worries in
the United States and shed 0.3%.
The dollar index .DXY measuring it against a basket of
currencies was up 0.1% near a three-week high of 99.146, and on
track for its best week in a month.
Balancing worries over the ramifications of any possible
impeachment of Trump was an apparent easing of trade tensions
between Washington and Beijing.
The trade war has upset financial markets and disrupted
global supply chains as the world's two largest economies heap
hundreds of billions of dollars in tariffs on each other's
products.
China's top diplomat said on Thursday that China was willing
to buy more U.S. products and that trade talks would yield
results. Those comments fuelled the positive mood after Trump on
Wednesday praised the Chinese purchases, saying a trade deal
could come sooner than people thought.
"Trade... remains the most important issue for markets, and
the news that we have had over the last couple of weeks I would
see as gestures of goodwill from both sides - trying to set up a
more constructive negotiation in a couple of weeks' time,"
Gimber added.
European shares reacted well to those signals, also getting
a boost from moves in currency markets. London stocks .FTSE
added 1%, with exporters buoyed by a weaker pound central bank
policymaker hinted at a cut in UK interest rates.
Sterling GBP=D3 was a other big loser in early London
trading, weakening 0.3% after Bank of England policymakers
Michael Saunders signalled a possible rate cut amid Brexit
uncertainty and disappointing global growth. Meanwhile the euro EUR=EBS was pinned at its lowest level
since May 2017 as a steady drip of negative economic data this
week sapped investor demand for the single currency, further
helping export-oriented European stocks.
A key market gauge of the euro zone's inflation expectations
fell to its lowest level since early July on Friday, reflecting
growing concern that the European Central Bank's stimulus will
be unable to fuel price pressures. SCEPTICISM ON MAJOR DEAL
Washington and China are preparing for another round of
trade talks scheduled for Oct. 10 and 11, but investors voiced
scepticism at prospects of a major breakthrough then.
"There is still a huge gulf," said Eoin Murray, head of
investment at Hermes Investment Management, adding that
prospects for a deal had receded from earlier in the year.
"Around April, May time, the main sticking point was the
enforcement mechanism - but we have retreated miles from that at
this point."
Tech remains a sticking point, with reports on Thursday that
the United States is unlikely to allow American firms to supply
China's Huawei Technologies HWT.UL undermining hopes of a
broad bilateral deal. Underlining market sensitivity, European chipmakers Infineon
IFXGn.DE and Siltronic WAFGn.DE both fell around 1.5%,
mirroring losses for Asian chip-related shares Samsung
Electronics 005930.KS and SK Hynix 000660.KS .
Major Huawei supplier Micron Technology MU.O had fallen 7%
in after-hours trade after it forecast first-quarter profit
below Wall Street targets.
In commodity markets, Brent crude LCOc1 futures fell $1,
or 1.5%, to $61.74 a barrel, weighed down by slowing Chinese
economic growth that dampens the demand outlook and a
faster-than-expected recovery in Saudi output.
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