* China, U.S. officials meet this week for crunch talks
* European, U.S. stocks recover after recent falls
* China's yuan gains 0.5% in offshore markets
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts, adds new details, quotes)
By Tommy Wilkes
LONDON, Oct 9 (Reuters) - Stocks gained on Wednesday as
investors clung to hopes that the United States and China could
yet agree some sort of trade deal, while the prospect of a
last-minute Brexit agreement between the European Union and
Britain seemed as remote as ever.
Markets have begun October in a nervous mood, and this week
has seen investors dump stocks on concern the U.S.-China
conflict over trade and foreign policy is nowhere near a
resolution and is increasingly damaging the global economy.
With a little more than three weeks until Britain is
scheduled to leave the EU, both sides launched into a blame game
over the lack of agreement on the terms of their divorce, giving
investors more to worry about.
But European shares managed to find a floor, with the
pan-regional Euro STOXX .STOXX extending gains after a media
report said China was open to a partial trade deal with the U.S.
despite the recent blacklisting of Chinese technology firms.
Germany's DAX .GDAXI strengthened 0.96%, France's CAC 40
.FCHI 0.77% and Britain's FTSE 100 .FTSE 0.6%. U.S. stock
futures ESc1 rose 0.87%, recovering some of the benchmark S&P
500's .SPX drop on Tuesday. "The market is reacting to news China may be open to a
partial deal with the U.S. and it seems they want to avoid the
increase in tariffs which will happen on Oct. 15," said Justin
Onuekwusi, fund manager at Legal and General Investment
Management.
"But a broad agreement doesn't seem to be on the cards given
the relationship between the U.S. and China seems to have
deteriorated in recent weeks. It looks like the trade talks in
coming days might be a bit of a waste of time."
Washington and Beijing are engaged in a year-long row that
has expanded beyond trade policy, suggesting even more damage to
a global economy that is already showing signs of slowing.
Hopes that the two sides could reach a truce this week faded
after President Donald Trump's administration introduced visa
restrictions on Chinese officials and added more Chinese
companies to a U.S. trade blacklist.
A U.S. official said high-level trade talks would still take
place on Thursday and Friday as planned, but Trump has said
tariffs on Chinese imports will rise on Oct. 15 if no progress
is made in the negotiations.
Oil prices snapped their losing streak and rebounded as
traders bet any easing of the U.S.-China tensions would benefit
global oil demand. O/R
The U.S. Treasury yield curve steepened after U.S. Federal
Reserve Chair Jerome Powell signalled further interest rate cuts
and the resumption of bond purchases following a recent spike in
money-market rates. TALKS
In Europe, talks between the European Union and Britain over
an agreement to cover London's departure from the EU on Oct. 31
appeared to be going nowhere. British lawmakers have voted to force Prime Minister Boris
Johnson to seek an extension to the departure date if he cannot
agree a deal, but the prospect of further prolonged political
uncertainty is worrying investors.
Sterling jumped after a British newspaper report said that
the EU would make a major concession in the negotiations, but
the gains were quickly unwound as EU sources denied it. The
pound was last down marginally on the day at $1.2214 GBP=D3 .
Many economists say markets have already priced in the
failure to reach a deal.
"In the interminably tedious EU-UK divorce process, things
are getting uninteresting. Tweets are being fired. Latin quotes
are being sent out. Markets did not expect a deal to be done,
and so should remain indifferent (unless it looks as if a
no-deal exit will be introduced in defiance of legislation),"
said UBS economist Paul Donovan.
With some semblance of risk appetite returning, the
safe-haven dollar fell, shedding 0.2% against the euro to
$1.0979 EUR= .
The offshore yuan, which fell on Tuesday, recovered 0.5% to
7.1311 yuan per dollar CNH=EBS .
Sweden's crown weakened to another decade low against the
euro EURSEK= . Scandinavian currencies have been buffeted by
concerns about a global trade slowdown, and the Norwegian crown
NOK= EURNOK= this week hit a more than decade low.
In bond markets, U.S. Treasury US10YT=RR and euro zone
government bond yields DE10YT=RR ticked higher as investors
happy to take on some more risk sold out of safer assets.
Spot gold prices succumbed to selling pressure and were last
down at $1,501 XAU= . Brent crude futures rallied 0.79% to $58.70 a barrel
LCOc1 , reversing earlier falls. U.S. West Texas Intermediate
crude increased 0.8% in price to $53.05 CLc1 .