GLOBAL MARKETS-Stocks cling to gains on trade optimism, mixed earnings knock Europe

* Mixed earnings weigh on European bourses

* Nikkei hits one-year high after S&P 500 reaches record

* Trump talks up progress on China trade

* EU grants Britain three-month Brexit extension

* Market sees Fed cutting rates, cautious on outlook

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Karin Strohecker

LONDON, Oct 29 (Reuters) - World stocks hovered near a

15-month high on Tuesday underpinned by cautious hopes over a

China-U.S trade deal and expectations of another dose of policy

stimulus from the Federal Reserve, with safe havens such as gold

and yen on the back foot.

A mixed bag of earnings offset the chipper mood on European

bourses, with the pan-regional STOXX 600 .STOXX snapping a

six-day winning streak to ease 0.4% and Germany's DAX index

.GDAXI slipped 0.1%. .EU

Britain's FTSE 100 .FTSE fell 0.5% as uncertainty over a

looming general election compounded a 2.6% drop in shares of BP

BP.L after the oil major posted a sharp drop in third quarter

profit. The losses in Europe followed a mixed performance in Asia,

where Japan's Nikkei .N225 rose 0.4% to reach levels last seen

a year ago. Shanghai blue chips .CSI300 dithered either side

of flat.

U.S. President Donald Trump said on Monday he expected to

sign a significant part of a trade deal with China ahead of

schedule but did not elaborate on the timing. The U.S. trade representative also said Washington was

studying whether to extend tariff suspensions on $34 billion of

Chinese goods set to expire on Dec. 28. But analysts cautioned that trade tensions were far from

over.

"It isn't yet clear that an interim deal that kicks trade

worries down the road would be sufficient to allay concerns

about the geopolitical, economic, earnings, and policy

backdrop," Mark Haefele, CIO at UBS Global Wealth Management.

"President Trump's announcement of a Chinese commitment to

buying $40–50 billion of U.S. agricultural products appears

unrealistic – U.S. exports to China peaked at just $26 billion

in 2012, when prices were much higher."

U.S. futures ESc1 NQc1 pointed to a flat open on Wall

Street after Monday's rally in which the S&P 500 .SPX gained

0.56% to a record closing peak, the Dow .DJI rose 0.49% and

the Nasdaq .IXIC 1.01%. .N

Microsoft Corp MSFT.O climbed 2.46% in late NY trade after

winning the Pentagon's $10 billion cloud computing contract,

beating out Amazon.com Inc AMZN.O . Google parent

Alphabet Inc GOOGL.O , meanwhile, slipped after missing

analysts' estimates for quarterly profit even though revenue

growth topped expectations. AND SEE

With markets in wait and see mode for Fed and trade

developments, bond yields inched lower. Germany's benchmark

10-year bond yield hovered just below three-month highs hit on

Monday, when yields across the single currency bloc rose sharply

after the European Union granted Britain a Brexit extension.

Yields on two-year U.S. Treasury notes were flat after

US2YT=TWEB hit four-week highs on Monday at 1.668%. US/

Investors are still looking forward to a likely rate cut

from the Federal Reserve on Wednesday, though the outlook was

less clear beyond that.

"We expect the Federal Reserve will cut rates this week and

possibly once next year, as insurance against a broad economic

slowdown," BlackRock's chief fixed income strategist, Scott

Thiel, said in a note to clients.

The futures market has 50 basis points of cuts priced in by

June FEDWATCH .

Central banks in Japan and Canada also meet this week, with

talk the former might ease further if only to prevent an

export-sapping bounce in its currency.

The shift from safe harbours saw the yen losing steam with

the dollar standing at 108.95 yen JPY= after having reached

its highest in three months. It was eyeing a key technical level

at 109.31.

The euro edged up to $1.1095 EUR= and the dollar index was

little changed against a basket of currencies at 97.784 .DXY .

The British pound GBP=D3 , meanwhile, wobbled briefly as

Britain looked set for a snap December election, with the recent

surge on hopes of a smooth Brexit looking capped by the outside

risks that the various election outcomes could bring to that

scenario.

Sterling has gained more than 5 percent over the last three

weeks against the greenback and stocks rallied as fears of

Britain crashing out of the European Union faded after European

policymakers agreed on a third extension until end-January.

Spot gold slipped 0.5% to $1,485 per ounce XAU= , after

having pulled away from last week's top around $1,517.

Oil prices were pressured by signs of rising U.S. crude

stock piles. O/R Brent crude LCOc1 futures slipped 70 cents

to $60.90 a barrel, while U.S. crude CLc1 lost 1 dollar to

$54.77.

Asia stock markets https://tmsnrt.rs/2zpUAr4

Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA

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