GLOBAL MARKETS-Hopes for U.S.-China trade progress push global stock index to record high

* Reports of U.S. willingness to cut tariffs boost risk
assets
* Pound traders lock in profits before British election
result
* Dovish Fed, ECB message also help risk trade

(Updates with closing prices, adds commentary)
By Sinéad Carew
NEW YORK, Dec 12 (Reuters) - MSCI's global stock index hit a
record high on Thursday and the U.S. dollar gained along with
U.S. Treasury yields after reports the United States has reached
in principle a "phase one" trade deal with China.
Citing two people familiar with the trade negotiations,
Reuters reported that the United States had offered to cut
existing tariffs on Chinese goods by as much as 50%, and to
suspend new tariffs due to kick in Sunday with an aim to
securing a deal. While the U.S. stock trading session ended without official
confirmation of a deal, President Donald Trump had encouraged
investor appetites for risk early in the day after he said the
countries were "very close." This also pushed safe-haven gold
prices lower while oil futures gained.
"I don't think many people expect a definite conclusion to
what's happening between the U.S. and China. But if we can reach
some status quo and if things aren't continuing to deteriorate,
maybe that can be taken as a positive," said Willie Delwiche,
investment strategist at Baird.
The Dow Jones Industrial Average .DJI rose 220.75 points,
or 0.79%, to 28,132.05, the S&P 500 .SPX gained 26.94 points,
or 0.86%, to 3,168.57 and the Nasdaq Composite .IXIC added
63.27 points, or 0.73%, to 8,717.32.
The pan-European STOXX 600 index .STOXX rose 0.33% and
MSCI's gauge of stocks across the globe .MIWD00000PUS gained
0.69%, surpassing the previous record reached in January 2018.
Earlier, European Central Bank head Christine Lagarde had
promised a strategic review of the bank's workings and left its
easy money stance unchanged, as expected. On Wednesday, the U.S. Federal Reserve held interest rates
steady and signaled borrowing costs will not change anytime
soon, with moderate economic growth and historically low
unemployment expected to persist through the 2020 presidential
election. But U.S. investors appeared to be laser focused on
U.S.-China trade relations headlines, which have long been a
major driver of volatility.
In currencies, the dollar jumped to a near two-week high
against the safe-haven Japanese yen. The dollar index .DXY , which measures the greenback
against a group of major currencies, rose 0.23%, with the euro
EUR= down 0.04% to $1.1124. The Japanese yen weakened 0.69%
versus the greenback at 109.32 per dollar.
"We have seen a strong risk-on reaction in the FX markets,"
said Vassili Serebriakov, an FX strategist at UBS in New York.
Sterling had a volatile day, falling below its eight-month
high against the dollar with voting underway in a UK election
which could decide whether Britain exits the European Union or
holds a referendum that could reverse the country's Brexit vote.

Sterling GBP= was last trading at $1.3163, down 0.23% on
the day. If UK Conservatives led by Boris Johnson, gain a majority,
that would allow the stalled Brexit deal to be passed. The
latest polls have shown his lead shrinking. Exit polls will begin around 2200 GMT, after voting closes.
Whether there will be a clear winner or another hung parliament
is likely to emerge between 0400 GMT and 0600 GMT. U.S. Treasury yields spiked with most maturities hitting
four-week highs after the reports on trade deal progress.
Benchmark 10-year notes US10YT=RR last fell 31/32 in price
to yield 1.8974%, from 1.79% late on Wednesday.
The 30-year bond US30YT=RR last fell 67/32 in price to
yield 2.3154%, from 2.22% late on Wednesday.
Oil prices were also boosted by trade optimism as the
U.S.-China tensions had raised concerns about global demand for
crude. U.S. crude CLcv1 rose 0.83% to $59.25 per barrel and Brent
LCOcv1 was last at $64.33, up 0.96% on the day.
In commodities, spot gold XAU= dropped 0.4% to $1,469.49
an ounce. Here is a graphic plotting the pound's move versus election
odds:

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Sterling vs. odds of Conservative majority in 2019 election https://tmsnrt.rs/2YHhmpw
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