GLOBAL MARKETS-Wall Street set for bounceback after COVID-19 keeps Europe in the red

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Reuters Live Markets blog: LIVE/

(Updates prices, adds comments and detail)
By Elizabeth Howcroft
LONDON, Oct 27 (Reuters) - European equities recovered some
of their early losses on Tuesday and futures pointed to a
recovery on Wall Street, after a wave of risk aversion swept
markets at the start of the week.
Wall Street had its biggest daily losses in a month on
Monday and Asian markets also fell overnight, which analysts
said was due to new lockdown measures in Europe and caution
ahead of the U.S. elections. The MSCI world equity index, which tracks shares in 49
countries, was broadly flat at 1134 GMT after dropping to a
19-day low in the previous session .MIWD00000PUS .
MSCI's main European Index hit a one-month low on Tuesday
before recovering to be down 0.2% on the day by 1136 GMT, while
the STOXX 600 .MSER also touched a one-month low before easing
to trade flat on the day .STOXX . Wall Street futures pointed to a bounceback in the United
States, with corporate earnings in focus. "Markets are stabilising somewhat today but we had a
relatively big sell-off yesterday," said Kiran Ganesh, a
multi-asset strategist at UBS.
"We think a number of things are coming together than have
been behind that: the new restrictions on movement on Europe has
delayed some projections on when we get back to pre-pandemic
norms," Ganesh said.
"We've got the signs that the election race is perhaps
narrowing. I think investors at the beginning of the month felt
a bit more optimistic on the chances of a blue wave leading to
more fiscal stimulus. If you look on some of the predictions
markets that seems to be narrowing somewhat," he added.
The United States has seen record COVID-19 infections, while
in France authorities are looking at options for tighter
lockdown measures as the virus has kept spreading despite some
of the tightest restrictions in Europe. In Italy, there were protests against lockdown restrictions
on Monday. German leaders are due to meet on Wednesday to decide
on additional restrictions. OVERWEIGHT
Dan Scott, chief investment officer at Vontobel Asset
Management, said he moved on Friday to an "underweight" position
on European equities and "double overweight" on emerging market
equities, in light of the resurgence of COVID-19 in Europe.
"We feel that Europe is not really through this as well as
other areas," Scott said.
"It's important for us not to have too much of a Europe-
focused view because there are other parts of the world coming
out of COVID quite nicely,” he said, citing Singapore and Hong
Kong planning a travel bubble, and Hong Kong unwinding its
restrictions. A lack of short-term progress towards a U.S. fiscal stimulus
also dampened sentiment. White House economic adviser Larry
Kudlow said talks had slowed but were continuing. But some investors were still optimistic that fiscal
stimulus was on the horizon.
"We're going to get fiscal stimulus eventually. If the
Republicans win we'll get less of it, quicker, and if the
Democrats win we'll get more of it, but it will take a bit
longer," said Scott.
Currency markets did not show risk-aversion to the same
extent as equities, with the dollar losing its early gains, down
0.2% against a basket of currencies at 1148 GMT. The euro was up 0.1% against the dollar and euro-sterling
slipped EUR=EBS EURGBP=D3 .
Brexit talks in London have been extended until Wednesday.
Prime Minister Boris Johnson said Britain's decision on whether
to agree a Brexit deal with the European Union was "entirely
separate" from the U.S. election result. Euro zone government bond yields slipped by 1-2 basis
points, with little appetite for major moves before Thursday's
European Central Bank meeting. Oil prices rose towards $41 a barrel, after recent sharp
losses. Brent crude LCOc1 gained 0.91% at $40.83 a barrel by
1152 GMT. U.S. oil CLc1 gained 1.01% to $38.95 a barrel.
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