* European shares mostly higher but gains limited
* Investors betting stimulus plans can ward off recession
* Safe-haven assets recover after Monday sell-off
* Focus shifting to Fed minutes, Jackson Hole symposium
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Aug 20 (Reuters) - Stock markets edged higher on
Tuesday as investors welcomed signs that more monetary and
fiscal stimulus was on its way, hoping more easing would help
stave off a major global economic downturn.
After a tumultuous first half of August when investors
dumped equities and poured their money into government debt and
other safe havens, some calm has returned to markets this week
amid talk of more stimulus in China and Germany.
The pan-region Euro Stoxx 600 eked out gains of 0.1%
.STOXX , following on from Monday's rally, while France's CAC
40 climbed 0.13% .FCHI and Britain's FTSE 100 0.4% .FTSE .
Germany's DAX was modestly lower, however .GDAXI .
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 47 countries, rose 0.1%, although the index remains
down more than 3% so far in August.
Futures markets point to Wall Street opening more or less
flat on Tuesday ESc1 .
Investors have this week cheered signs that policymakers are
willing to do more to support their economies and counter the
damage caused by international trade frictions, led by the
bruising Sino-U.S. trade war.
And not everyone thinks the economy is in as bad a shape as
the recent market sell-off - which accelerated last week after
short-term borrowing costs in the United States rose above
longer-term yields in a possible recession signal - has implied.
"We still see limited near-term recession risks as central
banks' dovish pivot helps stretch the economic cycle, yet
caution that trade and geopolitical tensions pose downside
risks," strategists at BlackRock (NYSE:BLK) Investment Institute said in
their weekly research note.
China's new lending reference rate was set slightly lower on
Tuesday after the central bank announced interest rate reforms
designed to reduce corporate borrowing costs. Meanwhile Germany's coalition government has said it would
be prepared to ditch its balanced budget rule to counter a
possible recession. The immediate focus now shifts to the minutes, due on
Wednesday, of the U.S. Federal Reserve's last meeting.
Traders are also awaiting the Fed's Jackson Hole seminar and
a Group of Seven summit this weekend for clues on what
additional steps policymakers will boost economic growth.
The Washington Post reported on Monday that senior White
House officials are discussing a temporary payroll tax cut to
help the economy. HAVENS RECOVER
Safe-haven assets, which panicked investors had flocked to
last week, were back in demand after suffering a bout of selling
on Monday.
The 10-year German bund yield fell 4 basis points to -0.688%
as investors bought into the benchmark euro zone bond, although
yields were above the record low of -0.727% DE10YT=RR .
The U.S. Treasury 10-year bond yield dropped 3 bps to
1.563%, above recent three-year lows US10YT=RR .
Financial markets went into a tailspin last week after the
Treasury yield curve briefly inverted when short-term yields
traded above those of long-term paper. The inversion has
presaged previous recessions and is widely watched by markets.
Spot gold prices rose 0.6% to $1,503 XAU= after tumbling
1.2% on Monday, their biggest daily drop in a month. GOL/
The Japanese yen, popular with nervous investors, rose 0.3%
to 106.33 yen per dollar JPY=EBS but was well below the recent
high of 105.05 touched last week.
The euro was little moved against the dollar at $1.1082
EUR=EBS .
Investors sold Italian government debt as the head of the
ruling 5-Star Movement signaled the imminent demise of the
coalition government by thanking Prime Minister Giuseppe Conte
for his time in office. Conte is set to address parliament later on Tuesday to
defend his record after the 5-Star's coalition partner, the
far-right League, said it would present a motion of no
confidence in the administration.
The benchmark 10-year Italian bond yield rose 4 basis points
to 1.47% IT10YT=RR .
In energy markets, oil prices initially extended Monday's
rally on broader market optimism before the gains fizzled. Brent
crude LCOc1 was last down marginally at $59.67 a barrel. U.S.
crude CLc1 also fell a touch to $56.11 a barrel. POLICY
The key for markets now is whether pledges for more
accommodative policy, either monetary or fiscal or a combination
of the two, are enough to assuage concerns about the state of
the global economy and end fears of recession.
In a sign of how far some central banks are willing to ease,
Australia's central bank discussed unconventional monetary
policies including negative interest rates at its Aug. 6 board
meeting, its minutes showed. Antoine Bouvet, senior rates strategist at ING, said the
Reserve Bank of Australia minutes were the most important news
of the day because of what they said about easing more
generally.
"It spells out what the market is implicitly pricing -
non-standard measures are difficult to withdraw," he said. "It
is reasonable for rates (government debt) markets to price those
measures remaining a feature for a long time."
Yield Curve History https://tmsnrt.rs/2Z0RacQ
MSCI world equity Index https://tmsnrt.rs/2Njsdlz
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