(Adds U.S. stock figures)
* Sterling rallies on potential Brexit breakthrough
* Irish bonds, stocks surge on deal speculation
* Upbeat start to U.S. earnings season lifts Wall Street
* Oil prices drop as trade war jitters cloud growth outlook
* World FX rates in 2019 tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, Oct 15 (Reuters) - Stocks in Europe and on Wall Street jumped about 1% on Tuesday on strong U.S. corporate results and a possible deal to avoid a disorderly British exit from the European Union, while oil prices fell as weak China data kindled global economic fears.
Media reports quoting EU officials as saying negotiators were close to a Brexit deal triggered a late afternoon rally across European equity markets and helped further lift Wall Street gains built on strong earnings reports.
Sterling rose to its highest level against the dollar and the euro since May after Bloomberg said British and EU negotiators were closing in on a draft Brexit deal.
Optimism over a Brexit breakthrough led the benchmark FTSE 100 stock index in London, which usually suffers from a pound rally, to pare most losses and end a tad lower.
The pound has strengthened nearly 5% over the past week as investors rushed to reprice the prospect of a last-minute Brexit deal before the Oct. 31 deadline.
The jump in stocks eased ongoing concerns about the impact of the prolonged U.S.-China trade war on global growth though investors held out hope the dispute could also be unwound.
"If we can resolve the China trade issue and have a reasonably good resolution to the Brexit issue with the UK, it adds a sense of optimism to the market. Combine that with the earnings today being good and happy days are here again," said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
MSCI's gauge of stocks across the globe gained 0.87% while the FTSEurofirst 300 index of leading European regional shares closed up 0.93%. The broad pan-European STOXX 600 index rose 1.11%.
The market is at an inflection point and may get good news from two major headwinds, the U.S.-China trade war and Brexit, said David Joy, chief market strategist at Ameriprise Financial.
"Things with Brexit are apparently moving pretty quickly," Joy said, adding investors remain skeptical about a Brexit deal.
Optimism over a potential Brexit deal helped allay concerns about a slowing economy brought on by the U.S.-China trade war, which has crimped German exports.
But the mood among German investors worsened less this month than analysts had expected, a ZEW survey showed, amid concern that Europe's biggest economy might be headed for recession.
ZEW's headline economic sentiment index, which in August touched its lowest in almost seven years, appears to have stabilized. Investor assessment of German's current economic condition in October was as pessimistic as it was in 2010.
Upbeat results from JPMorgan Chase & Co, UnitedHealth Group Inc and Johnson & Johnson eased concerns about the impact from a prolonged U.S.-China trade war on corporate America.
JPMorgan hit a record high and rose 3.01%, while UnitedHeath jumped 8.16% and J&J added 1.62%.
The Dow Jones Industrial Average rose 237.44 points, or 0.89%, to 27,024.8. The S&P 500 gained 29.53 points, or 1.00%, to 2,995.68 and the Nasdaq Composite added 100.06 points, or 1.24%, to 8,148.71.
Chinese stocks snapped a five-day winning streak after the latest factory gate data added to China's economic woes and the end of the trade war remained elusive.
The dollar index fell 0.15%, with the euro up 0.04% to $1.1032. The Japanese yen weakened 0.40% versus the greenback at 108.86 per dollar.
Sterling rose to $1.2774, up 1.33% on the day.
Oil futures closed lower. Brent crude fell 61 cents to settle at $58.74 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 78 cents to settle at $52.81 a barrel.
Prices for the benchmark U.S. Treasury's 10-year note fell 4/32, pushing its yield up to 1.7692%.
Euro zone government bonds sold off after media reports that UK and EU negotiators were close to a draft deal on Brexit boosted investors' risk appetite.
Irish government bonds outperformed euro zone peers on Brexit hopes. Yields on Irish 10-year bonds were back in negative territory at -0.02% after sliding 6 basis points on the day.
Dublin-listed shares surged 2.6% to the highest since September 2018.
Britain is Ireland's largest trading partner and its border with the British province of Northern Ireland has been the thorniest issue in Brexit negotiations.
Gold fell as growing risk appetite boosted investor demand for equities.
U.S. gold futures settled down 0.9% at $1,483.50 an ounce.
Reporting by Herbert Lash; Editing by Nick Macfie, Lisa Shumaker and Will Dunham