September 20, 2018 / 8:46 AM / 3 months ago

GLOBAL MARKETS-World stocks rise as trade relief bounce continues

* MSCI World index up 0.2 percent, but Chinese stocks dip

* Dollar steadies at 7-week low, Treasury yields dip

* Norwegian crown falls as central bank trims rate forecasts

* World FX rates in 2018 tmsnrt.rs/2egbfVh

By Danilo Masoni

MILAN, Sept 20 (Reuters) - A bounce in world stocks in relief that the fresh U.S. and Chinese tariffs on reciprocal imports were less harsh than feared continued on Thursday, although investors remained wary about the next steps in the US-Sino trade war.

An MSCI index tracking shares in 47 countries rose 0.2 percent, supported by gains in Europe and Asia, but Chinese equities dipped after a rally on bets of government stimulus to limit the economic damage of new trade barriers.

The pan-European STOXX benchmark rose 0.3 percent, while Japan's Nikkei ended little changed, barely moving after a well-anticipated win by Japanese Prime Minister Shinzo Abe in a ruling party leadership vote.

Markets were also watching a European Union summit where Prime Minister Theresa May appealed to fellow EU leaders on Wednesday to drop Brexit demands that she said could rip Britain apart.

After a knee-jerk negative reaction to the new tariffs announced by Washington and Beijing on Tuesday, markets have been speculating that an immediate escalation could be averted.

U.S. President Donald Trump has not made fresh threats that he would seek to extend tariffs to all Chinese imports.

"Making forecasts on Trump is always a risk but it's a fact that at the moment the escalation has taken a break," said Anthilia Capital fund manager and strategist Giuseppe Sersale.

For his part, Chinese Premier Li Keqiang said this week he would not would not weaken the yuan to boost exports.

Broader market sentiment was at odds with a new Reuters poll that showed unanimous agreement that an escalating trade war with China was bad economic policy for the United States and could cause economic growth to slow.

Rob Carnell, chief economist and head of research, Asia-Pacific at ING, said he saw more reasons to take a "glass-is-half-full" approach, given the recent emerging market selloff.

The consensus of the poll for U.S. growth showed a slowdown to 2.0 percent in the final quarter of 2019, less than half the last reported rate of 4.2 percent.

Meanwhile, S&P 500 E-mini futures were little changed following strong gains on Wall Street on Wednesday.

The rally in global stocks has been accompanied a drop in demand for safe-haven assets, boosting U.S. bonds yields and sending the dollar to seven-week lows. The Japanese yen has also been under pressure.

The yield on benchmark 10-year Treasury notes, which on Wednesday touched its highest level since May 18, eased back to 3.0682 percent on Thursday.

This move comes ahead of what is expected to be a hawkish meeting of the U.S. Federal Reserve next week.

All 113 economists in the Reuters poll forecast the Fed would hike rates when it meets Sept. 25-26. It is expected to follow that up with one more before the end of this year, taking the fed funds rate to 2.25-2.50 percent.

The dollar index, which tracks the dollar against a basket of six major rivals, dipped 0.18 percent at 94.371.

The dollar was 0.04 percent lower against the yen at 112.25 , while the euro was 0.26 percent stronger against the greenback at $1.1700.

The pound rose 0.3 percent to $1.3188 versus the dollar, helped by growing confidence that a Brexit trade deal can be clinched in the coming months.

On Thursday Cabinet Office minister David Lidington said Britain was over 85 percent of the way to agreeing a deal with the European Union on its exit from the bloc.

The Norwegian crown slumped versus the euro after the country's central bank raised interest rates for the first time in seven years, as expected, but trimmed its policy rate forecasts. The crown fell 0.9 percent versus the euro to 9.5990 EURNOK=D3.

In commodities, news of another drawdown in U.S. crude inventories and signs that OPEC may not raise output enough to compensate for the loss of Iranian exports hit by sanctions, lifted benchmark Brent crude 0.11 percent at $79.49.

Base metals rose, buoyed by relief over trade and a shortage of the metal in top consumer China, with London Metal Exchange zinc hitting its fortnight before paring some gains and trade up 0.50 percent at $2,446 a tonne. (Reporting by Danilo Masoni; Additional reporting by Andrew Galbraith in SHANGHAI; Editing by Jon Boyle)

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