GLOBAL MARKETS-U.S.-China trade hopes revive stocks, protests leave scars

* European markets, MSCI world index battle to avoid weekly
fall
* Kudlow says U.S., China getting close to trade deal
* Yen weakens, U.S. Treasury, European government yields
higher
* Hong Kong, Chile markets battered by protests
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Mixed week for commodities

By Marc Jones
LONDON, Nov 15 (Reuters) - Hopes of a trade deal between
Washington and Beijing turned world stock markets and other risk
assets higher on Friday, though an escalating wave of global
protests from Hong Kong to Chile left some deep scars.
Europe's main bourses followed Asia and Wall Street higher
.EU after White House economic advisor Larry Kudlow said on
Thursday that the U.S. and China were getting close to an
agreement and were talking every day. "We're getting close," he told an event at the Council on
Foreign Relations in Washington. "The mood music is pretty good,
and that has not always been so in these things."
It kept alive hopes that MSCI's 49-country world index
.MIWD00000PUS and Europe's STOXX 600 .STOXX could both avoid
their first weekly falls since the start of October, but others
had little chance.
Emerging market stocks .MSCIEF were down 1.7% for the
week, while the violent escalation of pro-democracy protests in
Hong Kong left the Hang Seng down 4.7% .HSI , its worst weekly
performance in four months.
Chinese blue-chip shares .CSI300 ended the day down 0.75%
and 2.4%, their biggest fall since August, while fierce
anti-government protests in Chile gave its currency its worst
week since 2011 with a 7% plunge CLPUSD=R .
Shane Oliver, chief economist at AMP Capital in Sydney,
likened regional markets' bullish reaction to positive trade
news to being in a relationship with an alcoholic, driven by
entrenched hopes for recovery.
"Markets want to believe that there will be some sort of
resolution to this issue, some sort of lasting truce at least,
even though the experience of the last 18 months doesn't give a
lot of cause for comfort," he said.
However, Oliver said weaker Chinese and U.S. economies as
well as the U.S. presidential election next year put pressure on
both sides to come to an agreement.
In currencies, the safe-haven yen JPY= weakened, with the
dollar rising 0.17% to buy 108.57 yen. The euro EUR= was
barely changed at $1.1023 and the dollar index, which tracks the
greenback against a basket of six major rivals .DXY was off
just 0.02% at 98.143.
Higher U.S. Treasury yields also illustrated the risk-on
tone in the Asian session, with the 10-year yield US10YT=RR
rising to 1.848% from a US close of 1.815% on Thursday.
The policy-sensitive two-year yield rose to 1.6101% from
1.593% on Thursday after U.S. Federal Reserve Chair Jerome
Powell said the risk of the U.S. economy facing a dramatic bust
is remote. A Reuters poll of more than 100 economists showed that while
concerns have eased over a U.S. recession, few see an economic
rebound, and most believe a trade truce is unlikely in the
coming year. VS CHINA
Government borrowing costs in Germany and France also inched
up on Friday, but were set for sizeable weekly declines, in
contrast to southern European countries that have come under
heavy selling pressure again this week.
Germany's 10-year Bund yield was at -0.33% DE10YT=RR off
more than one-week lows hit on Thursday. But it is down 8 bps on
the week, set for the biggest weekly fall since mid-August.
Dutch 10-year bond yields are down 7 bps this week, and French
yields are 5 bps lower NL10YT=RR , FR10YT=RR .
Data on Thursday had showed Germany's economy grew just 0.1%
in the third quarter, with consumer spending helping the country
to avoid a mild contraction and a technical recession of two
quarters of economic shrinkage.
"In general, there has been risk aversion in recent days and
a shift to core bond markets from the periphery," said Daniel
Lenz, a rates strategist at DZ Bank.
Global sentiment has been buffeted in recent weeks by
conflicting assessments of progress in talks between the United
States and China aimed at ending their 16-month-long trade war.
China's commerce ministry said the two countries are holding
"in-depth" discussions on a first phase trade agreement, and
that cancelling tariffs is an important condition to reaching a
deal. China has also ended a nearly five-year ban on imports of
U.S. poultry meat, which the U.S. Trade Representative said
would lead to more than $1 billion in annual shipments to China.
Those developments followed comments from officials from
both countries last week that they had a deal to roll back
tariffs, only to have U.S. President Donald Trump deny that any
such deal had been agreed to. The new record for the S&P, which gained just 0.08% to
3,096.63, came despite a grim outlook from network gear maker
Cisco Systems CSCO.O that underlined the impact of trade
uncertainty.
In commodity markets, U.S. crude prices rebounded after
sliding Thursday on rising U.S. crude inventories. U.S. West
Texas Intermediate crude CLc1 was 0.44% higher at $57.02 a
barrel.
Global benchmark Brent crude LCOc1 added 0.37% to $62.51
per barrel.
Gold retreated from gains that had been prompted by trade
uncertainty. Spot gold XAU= was last trading at $1,463.90 per
ounce, down 0.48%. GOL/

($1 = 6.9941 Chinese yuan)

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