* European earnings better-than-expected
* Markets eye escalating U.S.-China tensions
* Gold gains to new 9-year peak
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, July 23 (Reuters) - European stocks rose on Thursday
as better-than-expected corporate earnings offset worries about
rising cases of COVID-19 and a sharp escalation in tensions
between the United States and China.
Shares rallied to their strongest levels since February this
week - in many countries erasing their entire slump in March
when the coronavirus pandemic sent markets into freefall - as
investors bet that massive stimulus has carried economies
through the worst of it.
The pan-region Euro Stoxx 50 .STOXX50E climbed 0.42% while
the German DAX .GDAXI gained 0.43% and the FTSE 100 .FTSE by
a similar margin.
S&P mini-futures ESc1 added 0.29%, pointing to a stronger
open on Wall Street.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, rose 0.2%, close to Tuesday's level,
which was its highest since late February.
The gains came despite Washington's order to Beijing to
close its consulate in Houston, Texas amid accusations against
China of spying. These had weighed on risk sentiment earlier in
Asia, initially pulling shares lower before Asian stocks
rebounded.
China said the order was an "unprecedented escalation" by
Washington, and a source said Beijing was considering shutting
the U.S. consulate in Wuhan in retaliation.
U.S. President Donald Trump said that other consulate
closures were "always possible".
"You almost have a tug of war in markets between positives
and negatives and its finally balanced. It looks like markets
are pricing a V-shaped recovery so you can expect small
negatives to have an outsize impact on markets," said Justin
Onuekwusi, portfolio manager at Legal & General Investment
Management.
"But the pullback is likely to be shortlived as there are
people waiting for a dip."
Positive corporate earnings surprises in Europe helped the
mood, including from Unilever, French-Italian chipmaker
STMicroelectronics and automaker Daimler.
Investors will be keeping a close watch on U.S. weekly
jobless claims figures due at 1230 GMT for the latest
indications of how the novel coronavirus pandemic has affected
the American economy. The U.S. recorded more than 1,100 new
coronavirus deaths for a second straight day on Wednesday.
Despite the virus being far from under control, analysts say
unprecedented stimulus measures to boost battered economies
continue to provide structural support for riskier assets.
"The forces of liquidity are just unparalleled ... we're
seeing what happened post the GFC (global financial crisis), but
we're seeing it on steroids," said Kay Van-Petersen, global
macro strategist at Saxo Capital Markets in Singapore.
"It's rare that you see both monetary and fiscal policy
turned on, and then when they are they only turn on for a little
bit."
GOLD GLITTERS
In currency markets the euro was up 0.1%, close to the
21-month high of $1.1601 EUR=EBS it touched on Wednesday as
agreement between European Union members on a large economic
recovery fund continued to provide lift.
The dollar was down marginally against a basket of
currencies =USD and unchanged versus the Japanese yen
JPY=EBS .
Gold prices rose 0.3% to $1,876.60 per ounce, a new
nine-year peak, with prices up more than 23% on the year.
Investors have flocked to the safe-haven metal as they seek
shelter from a potential reversal in pumped-up stock prices and
a possible rise in inflation following so much monetary and
fiscal stimulus.
Oil prices edged up, with U.S. crude CLc1 adding 14 cents
to $42.04 a barrel and global benchmark Brent crude LCOc1 up
12 cents to $44.41 per barrel.
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