* MSCI all-country index inches to one-week high
* China, U.S. could reach trade deal - Trump adviser Kudlow
* But tariff fears subdue European markets, especially autos
* Tensions, policy expectations support dollar
* Powell speech awaited
* Sterling, euro also undermined by politics (Adds more details, background)
By Sujata Rao
LONDON, Nov 28 (Reuters) - Hopes for a thaw in U.S.-China trade ties at the upcoming G20 summit helped world shares inch to a one-week high on Wednesday, though fears of a no-deal outcome weighed on European bourses and kept the dollar firm for the fourth day in a row.
While President Donald Trump talked tough on the trade tariffs issue ahead of a meeting with Chinese President Xi Jinping on Saturday, markets focused on comments by White House economic adviser Larry Kudlow, who held open the possibility that the two countries would reach a trade deal.
A rapprochement is seen as crucial, given that world growth and trade are already showing signs of an alarming slowdown.
Kudlow's comments allowed Chinese and Japanese shares to rally 1 percent while MSCI's all-country equity index was up 0.15 percent and the pan-European benchmark rose 0.2 percent.
Futures indicated a firm opening on Wall Street, with the S&P500, Nasdaq and Dow Jones tipped to rise between 0.3-0.5 percent .
There was some caution, however, especially in Europe, which was hit on Tuesday by a report that Trump may soon decide about new taxes on imported cars. Europe's auto sector shares were 0.3 percent in the red.
"An expectation is being priced into markets ahead of the G20 meeting that we will see some deal or at least a framework for a deal between Trump and Xi Jinping," said Bernd Berg, global macro strategist at Swiss-based Woodman Asset Management.
"But if they come out with nothing this weekend, it's going to be very bad."
The uncertainty over global trade as well as Brexit and Italy's conflict with the European Union, are supporting the U.S. dollar, which is at a two-week high against a basket of currencies.
While the main driver for the greenback is the U.S. interest rate path, Rodrigo Catril, senior strategist at National Australia Bank, said it was also benefiting from the uncertain mood.
"Markets seem to be jumping at shadows at the moment and against this backdrop of uncertainty, the dollar remains the preferred option for weathering the storm," Catril said.
With the currency index approaching 1-1/2-year highs reached earlier this month, traders are focusing on a speech at 1700 GMT by Federal Reserve Chair Jerome Powell to see if he offers clues on how many more times the Fed could raise interest rates.
While Fed Vice Chair Richard Clarida took a less dovish stance on Tuesday than some had expected and backed more rate rises, Powell and his colleagues have in recent weeks alluded to global volatility, leading many to speculate the bank's three-year-long rate rise campaign could pause in 2019. .
However most reckon the Fed is on track to tighten policy in December and early-2019 at least.
"My base case is the dollar will strengthen versus the euro and pound into year-end, as the euro zone and Britain are both struggling with their own problems -- Brexit and Italy," Woodman's Berg said.
Sterling climbed off two-week lows to rise 0.4 percent by 1215 GMT, having touched a session-high of $1.2806 after the opposition's main finance spokesman John McDonnell said he could accept a second Brexit referendum.
Against the euro it rose half a percent to touch a high of 88.105 pence
McDonnell's comments raise hopes that the Labour Party will more firmly back putting the Brexit issue to a second vote, should Prime Minister Theresa May fail to convince sceptical lawmakers of the benefits of her Brexit deal ahead of a December 11 parliamentary vote.
Investors are monitoring developments in Italy's row with the EU over its budget spending, with Germany's Handelsblatt and Italy's La Stampa quoting EU commissioner Valdis Dombrovskis as saying the draft budget needed "substantial correction".
Italian bond yields flatlined after sharp rallies that were triggered by what appeared to be a more conciliatory stance from the government over the issue.
On other markets, cryptocurrency bitcoin jumped 6 percent to above $4,000, extending its rebound from a low of $3,475 touched on Sunday.
Brent oil futures slipped back to around $60 a barrel, reversing earlier gains as Saudi Arabia dampened expectations of production cuts by the OPEC producer club and inventories of crude remain high.
Reporting by Sujata Rao; additional reporting by Swati Pandey in Sydney and Hideyuki Sano in Tokyo; editing by Gareth Jones