(Adds U.S. market open, byline, dateline; previous LONDON)
* S&P 500 hits record high on Merck, Pfizer results
* Poor earnings cloud European equities
* Oil gains as trade tensions ease, U.S. equities rise
* Dollar slips as market expects Fed rate cut
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, Oct 29 (Reuters) - World stocks edged higher on
Tuesday, lifted by strong earnings from big U.S. drugmakers
Merck and Pfizer and expectations of another dose of policy
stimulus from the U.S. Federal Reserve, while oil prices pared
earlier losses.
European shares slid as they headed toward their worst
quarterly earnings in more than three years, according to the
latest estimates by Refinitiv, underscoring concerns about the
deteriorating health of Europe Inc.
The benchmark U.S. S&P 500 index eked out a fresh record
high, led by Merck and Pfizer, though a disappointing profit
report from Google parent Alphabet kept the technology-rich
Nasdaq in the red.
The index breached its all-time high set in July on Monday,
spurred by hopes of a U.S.-China trade deal and expectations of
another Fed rate cut.
The steepening of the two- and 10-year yield curve suggests
a budding risk-on sentiment among investors, now that some form
of a U.S.-Sino trade agreement is likely, said Yousef Abbasi,
global market strategist at INTL FCStone Financial in New York.
U.S. President Donald Trump said on Monday he expected to
sign a significant part of a trade deal with China ahead of
schedule but did not elaborate on the timing.
The spread in the yield curve has gained
about 20 basis points since leaving negative territory, a
recession indicator, in early September.
A rotation into value stocks that investors have posited for
months seems be taking hold, Abbasi said, pointing to recent
gains in the SPDR S&P Regional Banking ETF as evidence.
The ETF has traded below 56 since May and could be set for
further upside after a recent rally from below 50, he said.
"We're seeing some of those high-flying tech names
struggle," Abbasi said. "We're getting that risk-on move from
sectors that have been ignored all year, the sectors that
haven't been loved."
Apple and Microsoft fell, as did
Amazon.com, while healthcare, the second-worst
performing sector in the S&P 500 this year, rose.
MSCI's gauge of stocks across the globe
gained 0.12%, while the pan-European STOXX 600 index
lost 0.37%. MSCI's emerging markets index was off a
scant 0.03%.
On Wall Street, the Dow Jones Industrial Average rose
5.13 points, or 0.02%, to 27,095.85 and the S&P 500
gained 3.82 points, or 0.13%, to 3,043.24. But the Nasdaq
Composite dropped 30.59 points, or 0.37%, to 8,295.40.
Oil pared losses amid rising U.S. equities and hopes of
easing U.S.-China trade tensions.
Brent crude fell 10 cents at $61.47 a barrel, while
U.S. West Texas Intermediate crude slid 3 cents to
$55.78.
Britain's FTSE 100 fell 0.34% as uncertainty over a
looming general election compounded a 4.0% drop in shares of BP
after the oil major posted a sharp drop in third quarter
profit.
The losses in Europe followed a mixed performance in Asia,
where Japan's Nikkei rose 0.4% to reach levels last seen
a year ago. Shanghai blue chips dithered either side
of flat.
Benchmark 10-year U.S. notes rose 5/32 in price
to yield 1.8349%.
(Reporting by Herbert Lash; Editing by Bernadette Baum)
BP (BP.)
