* MSCI world index up 0.1% to record high
* Washington says trade deal done, China reticent
* Sterling heads for worst week since late 2017
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Updates prices throughout)
By Tom Wilson
LONDON, Dec 20 (Reuters) - World stocks touched record highs
on Friday, as trading wound down before the year-end holidays,
while the British pound was heading towards its worst week for
more than two years amid renewed worries over how Britain will
leave the European Union.
MSCI's world equity index .MIWD00000PUS , which tracks
shares in 49 countries, gained a smidgeon to 561.31, bettering a
record scaled on Thursday as optimism infused markets after the
United States and China agreed an initial trade deal.
The MSCI index is on track to advance more than 1% this
week, in what would be its fourth straight week of gains.
European shares led the way, with the broad Euro STOXX 600
.STOXX gaining ground through the morning to add 0.6%. Indexes
in Frankfurt .GDAXI , Paris .FCHI and London .FTSE all made
similar gains in thin trading.
Yet Shell RDSa.L shares fell 1.1% after it said it
expected impairment charges of up to $2.3 billion in the fourth
quarter due to a weaker economic outlook. On Wall Street, futures for the S&P 500 ESc1 were flat
near all-time highs, having risen more than 1% in the week.
Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS added a sliver, having risen 1.2%
so far this week and almost 5% this month.
Underscoring that the trade war issue has been put to bed
for now, U.S. Treasury Secretary Steven Mnuchin said the United
States and China would sign their so-called phase one trade pact
in early January.
Mnuchin said the documentation was completely finished and
just undergoing a technical "scrub", though Beijing has so far
dodged all details of the deal. The U.S. House of Representatives also overwhelmingly
approved a new North American deal that leaves $1.2 trillion in
annual U.S.-Mexico-Canada tradeflows largely intact.
Market players were already beginning to look at what the
next steps for the Washington-Beijing saga will be in the new
year.
"The focus will be on what the outlook is on a more
comprehensive phase two deal - what the language is like, what
Trump and the Chinese are saying about it," said Neil Wilson,
chief markets analyst at Markets.com.
Wall Street investors had on Thursday pushed the S&P 500
.SPX to a sixth straight record, its longest such streak since
January 2018. All three major U.S. indexes - S&P 500, Nasdaq and
Dow - notched record closing highs. .N
Still, some data reminded investors of the fragile state of
the world economy.
The mood among German consumers deteriorated unexpectedly
heading into January, a survey showed, suggesting that household
spending in Europe's largest economy could weaken at the
beginning of next year. IN PERIL
On the currency front, sterling steadied after suffering a
sharp reversal that left it facing its worst weekly fall since
late 2017 of around 2%.
Former Bank of England deputy governor Andrew Bailey will be
the central bank's next governor, Britain's finance minister
said. Bailey will serve an eight-year term, with investors
expecting continuity on monetary policy. The pound was up 0.2% at $1.3029 GBP=D3 having slipped
overnight to below $1.30, a dramatic drop from a $1.3514 peak,
after British Prime Minister Boris Johnson used his sweeping
election victory to revive the risk of a hard Brexit.
"We see the biggest risks being to GBP/USD depreciation over
the next two weeks as Brexit preparations take place amidst the
most sluggish UK economy in 10 years," said Richard Grace, chief
currency strategist at CBA.
The British parliament will vote at around 1430 GMT on
Johnson's Brexit deal. Against a basket of currencies, the dollar edged up 0.2% to
97.530 .DXY and was set for its best week in a month.
Traders were focused on a final reading of U.S. economic
growth in the third quarter, due later in the session.