REFILE-GLOBAL MARKETS-Shares inch higher as stimulus hopes spur rebound

(In paragraph 15, fixes garbled spelling of 'to')
* European shares mostly higher in early trade
* Investors betting stimulus plans can ward off recession
* Safe haven assets steady after Monday selloff
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, Aug 20 (Reuters) - European shares followed their
Asian counterparts higher on Tuesday as investors bet possible
monetary and fiscal stimulus measures would help stave off a
major global economic downturn.
After a tumultuous first half of August as investors dumped
equities and poured their money into government debt and other
safe haven assets, some calm has returned to markets this week
as traders welcomed talk of more stimulus in China and Germany.
In early European trade, the pan-region Euro Stoxx 600 rose
0.2% .STOXX , the German DAX gained 0.1% .GDAXI , and
Britain's FTSE rose 0.36% .FTSE . That followed gains in Asia.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 47 countries, rose 0.1% and followed a decent rebound
on Monday.
Investors were cheered by signs policymakers were willing to
do more to support their economies in the grip of international
trade frictions, led by the bruising Sino-U.S. tariff tussle,
and not everyone thinks the economy is in as bad shape as the
market selloff last week 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 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, while Germany's
right-left coalition government has said it would be prepared to
ditch its balanced budget rule and take on new debt to counter a
possible recession. The immediate focus now shifts to the minutes of the U.S.
Federal Reserve's last meeting due on Wednesday. Traders are
also keenly waiting on the Fed's Jackson Hole seminar and a
Group of Seven summit this weekend for clues on what additional
steps policymakers will take to bolster growth.
Senior White House officials are discussing a temporary
payroll tax cut to boost the economy, the Washington Post
reported on Monday. HAVENS STEADY
Safe haven assets, which panicked investors had flocked to
last week, saw their prices steady on Tuesday.
Bond yields rose marginally but remained below three-year
highs touched last week. The 10-year German bund yield fell 2
basis points to -0.67%, above the record low of -0.727%
DE10YT=RR .
The U.S. Treasury 10-year bond yield was 2 basis points
lower at 1.582%, also 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 as
a harbinger of a downturn.
Spot gold prices rose 0.4% to $1,501 XAU= after tumbling
1.2% on Monday, their biggest daily drop in about a month.
GOL/
The Japanese yen, a popular currency for investors looking
for safety, rose 0.2% to 106.41 yen per dollar JPY=EBS but was
well below the highs of 105.05 touched last week.
Elsewhere in currency markets the euro was little moved
against the dollar at $1.1075 EUR=EBS as traders prepare for
the release of Fed minutes later in the week.
Investors will be watching the political situation in Italy,
where Prime Minister Giuseppe Conte is set to address parliament
on Tuesday afternoon (1300 GMT) to defend his record amid the
growing chance of a snap general election.
Conte might hand in his resignation immediately afterwards
or could instead wait for a formal vote to make it clear he is
being unseated by the far-right League.
In energy markets, oil prices rose on the broader market
optimism. Brent crude LCOc1 gained 0.13% to $59.82 a barrel,
after climbing 1.88% on Monday. U.S. crude CLc1 was up
marginally at $56.25 a barrel, after rallying 2.44% in the
previous session. 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 August board
meeting, according to minutes of the Reserve Bank of Australia's
(RBA) Aug. 6 meeting. Antoine Bouvet, senior rates strategist at ING, said the RBA
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 markets to price those measures
remaining a feature for a long time."