* European earnings are better-than-expected
* Markets eye escalating U.S.-China tensions
* Gold extends gains to new 9-year peak
* Investors prepare for U.S. jobs data due at 1230 GMT
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, July 23 (Reuters) - Stock markets rose on Thursday
as better-than-expected corporate earnings in Europe offset
worries about rising cases of COVID-19 and a sharp escalation in
tensions between the United States and China.
Shares have 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 0.57% while
the German DAX .GDAXI gained 0.64% and the FTSE 100 .FTSE by
0.58%.
S&P mini-futures ESc1 added 0.34%, pointing to a stronger
open on Wall Street.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, rose 0.13%, close to Tuesday's level,
which was its highest since late February. It has surged around
45% since the lows of late March.
The gains this week are despite Washington's order to
Beijing to close its consulate in Houston, Texas amid
accusations against China of spying, which initially pulled
shares lower in Asia before stocks rebounded.
China called the order an "unprecedented escalation" by
Washington and warned it would be forced to respond.
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 it's 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 ULVR.L UNA.AS , French-Italian
chipmaker STMicroelectronics STM.BN and automaker Daimler
DAIGn.DE . 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% to $1.1583, 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.
Traders pleased with the deal have also pushed Italian
borrowing costs lower, and yields on 10-year government debt
dropped to a new 4-1/2 month low IT10YT=RR , moving closer to
1%.
The dollar was down marginally against a basket of
currencies =USD and unchanged versus the Japanese yen
JPY=EBS .
Gold prices rose 0.6% to $1,888 per ounce, a new nine-year
peak, with prices up 24% 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. prices gave up earlier gains, with U.S. crude CLc1
down slightly to $41.85 a barrel and global benchmark Brent
crude LCOc1 nine cents lower at $44.20 per barrel.
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Spot gold price https://tmsnrt.rs/2ZQaU1m
The MSCI world equity index https://tmsnrt.rs/2CyOyca
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