* Stocks dither, euro jumps back above $1.10
* Mixed reports on U.S.-China trade negotiations
* Copper enjoys best day in a month
* Turkey assets under pressure after Syria incursion
By Marc Jones
LONDON, Oct 10 (Reuters) - A dive in the dollar catapulted
the euro higher and flattened stocks on Thursday as the first
U.S.-China trade talks since July and a report accusing the
European Central Bank chief Mario Draghi of going rogue jostled
for attention.
Markets were bombarded from all sides: denials and
counter-denials on the state of U.S.-China trade talks and the
Brexit countdown, a Turkish military push into Syria and a
blizzard of weak data stretching from Japan to France.
Asia had managed a broadly positive finish but Europe's main
bourses and Wall Street futures were left dithering .EU as the
more serious action took place in the currency markets. /FRX
The euro EUR=EBS shot above $1.10 versus the dollar as the
greenback turned weaker across the board .DXY - partly due to
market chatter about a currency pact with China to stop
devaluation - but there was plenty else too.
The Financial Times reported that the ECB had restarted its
bond-buying programme last month despite objections from its own
officials, a further sign of how the move has reopened divisions
within the institution. ECB meeting minutes then showed similar.
"The view on the currency story could be swinging here,"
said Saxo Bank's head of European currency strategy, John Hardy,
"And the market is sensing that euro-dollar is the pressure
point."
Perhaps the main mover overnight though was a rally in
China's offshore yuan, which strengthened to its best levels in
more than two weeks after a Bloomberg report said U.S. and
Chinese officials were reviving a currency pact first mooted
earlier this year that stops further tariff hikes in return for
commitments to hold the yuan stable.
As well as the ECB resistance to Draghi's moves, that could
also have a read-across for the euro, Saxo's Hardy said, with
the United States expected to lay out sanctions next week in
retaliation for Europe's past aid for planemaker Airbus.
U.S. President Donald Trump has repeatedly flagged how the
euro has been weakened by extreme measures such as negative
interest rates, so he may effectively issue a "cease and desist"
along with the sanctions, Hardy said.
There also was the Brexit tangle. UK Prime Minister Boris
Johnson was meeting his Irish counterpart in a last-ditch
attempt to revive a British proposal for a deal that the EU said
falls far short of what is needed. "Big picture - the more severe that Brexit is, in the short
term, it's likely to lead to a lower value of the pound, a
higher level of inflation and slower growth in the economy,"
Bank of England chief Mark Carney told reporters.
'DIRE' TRADE SITUATION
S&P 500 mini futures ESc1 traded down 0.2%, though losses
had been trimmed by a New York Times report that Washington
would soon issue licences allowing some U.S. firms to supply
non-sensitive goods to China's Huawei Technologies. HWT.UL
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS had closed 0.1% higher while Japan's Nikkei
.N225 rose 0.45%. Shanghai shares .SSEC also rose 0.8%.
Top U.S. and Chinese negotiators were scheduled to meet in
Washington on Thursday and Friday to try to end a bruising
15-month-old trade war.
Without significant progress, Trump is set to raise the
tariff rate on $250 billion worth of Chinese goods to 30% from
25% next Tuesday.
"Barring any surprise today, it looks like their talks are
breaking down. The tariff will be hiked. The situation looks
dire," said Norihiro Fujito, chief investment strategist at
Mitsubishi UFJ Morgan Stanley Securities.
China is unlikely to be willing to make an easy compromise
with a U.S. president who seems increasingly vulnerable to
domestic political pressure as opposition Democrats seek to
impeach him, analysts said.
U.S. Democratic presidential contender Joe Biden called for
the impeachment of Trump for the first time in a deepening
partisan fight over a congressional investigation of the
Republican president. "Mr. Trump's recent impeachment risk has turned the
timetable against him," Chi Lo, senior economist at BNP Paribas
Asset in Hong Kong, wrote in a report to clients.
U.S. Treasuries yield went flat having risen to 1.594% on
Wednesday, pressured partly by this week's heavy bond supply.
The 10-year Treasuries yield had dipped to 1.577%
US10YT=RR overnight, but had shuffled back up to 1.590 ahead
of U.S. trading while all the ECB chatter also pushed euro zone
yields slightly higher.
In commodities, oil prices also turned, with Brent bouncing
between $52.82 and $58.23 a barrel and U.S. (WTI) crude CLc1
at $52.50 per barrel. Copper CMCU3 strained for its best day
in a month as it rose 1.1% to $5,749 a tonne.
Among the heavyweight emerging markets, Turkey's lira and
government bonds saw another day of falls as investors fretted
about negative international reaction to Ankara's military
operation in northeast Syria. Focus was also on the mood in Ecuador after another day of
fierce protests against recent fuel price hikes had hammered its
markets on Wednesday.