GLOBAL MARKETS-World stocks eye record levels as Washington gridlock curbs policy risks

* MSCI all-country world index near record peak hit in Sept
* Asian shares edge up, Japan's Nikkei hits 29-year high
* U.S. bond yields fall, dollar under pressure
* Gold, bitcoin gain while oil suffers from COVID-19 worries
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano and Koh Gui Qing
TOKYO/NEW YORK, Nov 6 (Reuters) - Global stocks eyed an
all-time peak while the dollar and U.S. bond yields stayed
sluggish on Friday on hopes that a divided U.S. legislature
would hinder large government borrowing, which could pave the
way for even more central bank stimulus.
Investors expect Democrat Joe Biden to beat President Donald
Trump and the Republicans to retain control of the Senate,
allowing them to block Democrat policy such as corporate tax
hikes and debt-funded spending on infrastructure.
"With the prospects of fiscal stimulus constrained by a
likely gridlock in Washington, monetary policy will likely have
to do heavy lifting, boosting risk assets and putting pressure
on the dollar," said Hiroshi Watanabe, economist at Sony
Financial Holdings.
A sense that a Biden presidency will be more predictable
than Trump's is also underpinning risk sentiment, even though
investors saw no quick rapprochement between Washington and
Beijing on trade and other issues.
MSCI's all-country index of the world's 49 markets
.MIWD00000PUS inched up 0.05%, bringing its record peak hit in
September within sight.
Japan's Nikkei average rose 0.9% .N225 to a 29-year high
while MSCI's broadest gauge of Asian Pacific shares outside
Japan rose 0.3% near 3-year high. .MIAPJ0000PUS .
European stocks are seen giving up some of their big gains
this week, with Euro Stoxx 50 futures STXEc1 down 0.8% and
FTSE futures FFIc1 falling 0.5%.
U.S. S&P futures ESc1 dropped 0.7% on profit-taking, a day
after the underlying stock index .SPX rose 1.95%.
Trump's attempts to pursue lawsuits challenging the election
process in several states have so far done little to change
investors' expectations on the election outcome.
Still, some market players are wary of street protests
getting violent, after Trump claimed the election was being
"stolen" from him. U.S. bond yields drifted lower, with 10-year Treasury yield
US10YT=RR falling to 0.766%, more than 150 basis points below
the pre-U.S. election level seen on Tuesday. It had struck a
three-week low of 0.7180% on Thursday. US/
The Federal Reserve kept its monetary policy loose and
pledged to do whatever it takes to sustain a U.S. economic
recovery. With COVID-19 raging in the United States and parts of
Europe, many investors assume more monetary stimulus is
inevitable.
The Bank of England expanded its asset purchase scheme on
Thursday while the European Central Bank is widely expected to
announce more stimulus next month.
Investors also focused on the prospects of stalled talks on
a U.S. coronavirus relief package restarting.
"We still anticipate that there will be a fiscal package in
excess of $1 trillion next year," said James Knightley, chief
international economist at ING Group in New York.
"This stimulus, when combined with a long-anticipated
COVID-19 vaccine, can really lift the economy and drive growth.
We consequently remain very upbeat on the prospects for 2021 and
2022."
In currency markets, lower yields undermined the dollar
against its rivals.
The dollar index touched a two-month low of 92.473 and last
stood at 92.718 =USD .
The euro traded at $1.1810 EUR= while the offshore Chinese
yuan hit a near 2 1/2-year high of 6.6000 to the dollar CNH= .
A softer dollar supported the Japanese yen JPY= , which
climbed to a near eight-month high of 103.43 yen against the
dollar overnight. It was steady in early Asian trade at 103.52
yen.
Gold XAU= , which is limited in supply and seen as a hedge
against inflation in an era of ultra-loose monetary and fiscal
policies, eased slightly to $1,939 per ounce after jumping over
2% overnight. GOL/
Even bitcoin BTC=BTSP rode high, notching up a gain of 10%
on Thursday and hitting a high last seen in January 2018.
Oil prices were sluggish as new lockdowns in Europe to
contain the coronavirus disease darkened the outlook for crude
demand. Brent crude LCOc1 was down 1.73% at $40.22 a barrel.
O/R

(Editing by Sam Holmes)