* Focus turns to Fed decision
* EU approves Brexit extension to 31 Jan 2020
* Dollar weak on trade optimism, before Fed meeting
* Gold eases; Treasury yields rise (Updates prices, changes comments, dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Oct 28 (Reuters) - An index of global stock markets rose to a 21-month high on Monday, boosted by growing hopes for a U.S.-China trade deal and the view that the U.S. Federal Reserve this week will deliver its third interest rate cut for 2019.
U.S. Treasury yields rose after the European Union agreed to a three-month flexible delay of Britain's departure. Improved risk sentiment also sapped demand for the safe-haven U.S. dollar, the Japanese yen and gold.
MSCI's All Country World Index, which tracks shares across 47 countries, was up 0.46, its highest intraday level since Feb. 2, 2018.
U.S. and Chinese officials are "close to finalizing" parts of a trade agreement after high-level telephone discussions on Friday, the U.S. Trade Representative's office and China's Commerce Ministry said. The USTR provided no details on areas of progress.
U.S. President Donald Trump has said he hopes to sign the deal with China's President Xi Jinping next month at a summit in Chile.
"Markets seem convinced the first deal will get done and that negotiations are progressing on the next deal," said Edward Moya, senior market analyst at Oanda.
Strong results from U.S. companies have boosted risk sentiment, and investors are hopeful the Fed will cut interest rates at its meeting this week.
On Wall Street, the S&P 500 hit a record high. Microsoft Corp boosted all three main indexes, after the tech giant beat Amazon.com Inc for the Pentagon's $10 billion cloud computing contract.
The Dow Jones Industrial Average rose 149.1 points, or 0.55%, to 27,107.16, the S&P 500 gained 17.16 points, or 0.57%, to 3,039.71 and the Nasdaq Composite added 69.35 points, or 0.84%, to 8,312.47.
The pan-European STOXX 600 index rose 0.33% to their highest since January 2018, helped by trade-exposed auto and mining stocks.
In currency markets, the U.S. dollar slipped as trade deal optimism reduced demand for safe haven currencies.
"Positive trade headlines continue to support our view that trade tensions are easing," said Win Thin, global head of FX strategy at Brown Brothers Harriman.
The dollar index, which measures the greenback against a basket of six major currencies was 0.06% lower on the day.
Sterling was little changed after the European Union granted Britain a three-month extension to exit the bloc. Expectations of a delay were already priced in.
The benchmark 10-year U.S. Treasury yield was last up 5.7 basis points to 1.858%, the biggest move across maturities.
Oil prices were little changed as trade hopes supported prices but weak Chinese industrial data weighed.
Brent crude was 0.2 cents lower, or 0.32%, at $61.82 a barrel. West Texas Intermediate (WTI) crude fell 0.51 cents, or 0.9% to $56.15 a barrel.
Gold eased as trade hopes limited gains after the precious metal jumped 1% in the previous session. Spot gold was down 0.8% at $1,492.2343 per ounce.
Reporting by Saqib Iqbal Ahmed; additional reporting by Karen Brettell in New York and Arjun Panchadar in Bengaluru; Editing by David Gregorio