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REFILE-GLOBAL MARKETS-European shares recover after shaky start; caution reigns before U.S. elections

Tue, 20th Oct 2020 09:34

(Adds dropped word 'shares' to headline)

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Reuters Live Markets blog:

LONDON, Oct 20 (Reuters) - European stocks recovered from
early losses on Friday, following a bearish Asian session where
investors adjusted their risk exposure before the U.S. elections
two weeks away. Record COVID-19 cases in Europe also weighed on
sentiment.

MSCI world equity index, which tracks shares in 49
countries, slipped as much as 0.2%.

By 0825 GMT, MSCI's main European Index was up 0.4%
and Europe's STOXX 600 was up 0.2, after initially
falling as fears about the economic impact of lockdown
restrictions outweighed some strong earnings.

With just two weeks until the U.S. presidential elections on
Nov. 3, analysts said that investors were reining in their
riskier bets.

President Donald Trump and Democratic rival Joe Biden will
debate each other in an event on Thursday which will feature a
mute button to allow each candidate to speak uninterrupted.

U.S. fiscal stimulus talks are in focus, as House Speaker
Nancy Pelosi set today as a self-imposed deadline for reaching a
deal on a coronavirus aid package.

Pelosi said over the weekend that differences remained but
that she was optimistic legislation could be pushed through
before the election. But markets
doubted fiscal stimulus would be passed in the near term.

"The likelihood of a deal taking place appears no more
likely now than it was a week ago," said Michael Hewson, chief
market analyst at CMC Markets. The lack of action is
particularly concerning in light of rising COVID-19 cases in the
United States, he said.

"While equity markets appear to be struggling in the short
term, the lack of a fiscal stimulus deal in the next two weeks
is probably neither here nor there," he added.

"Most investors expect to see some sort of fiscal stimulus
in the next six months, whoever gets in, with the only unknown
being around the size and scale, and the timing. The problem for
stock markets is that they want to see it now."

New, tougher restrictions to limit the spread of coronavirus
in Europe also weighed on sentiment. Ireland announced some of
Europe's strictest constraints on Monday, telling people not to
travel more than five kilometres from home. New restrictions
were also approved in the Lombardy region of Italy.

France reported a massive increase in the number of people
hospitalised.

The U.S. dollar was steady against a basket of currencies,
flat on the day at 93.435 at 0742 GMT. Riskier currencies
such as the Aussie and Kiwi dollars were down.

Minutes of the Reserve Bank of Australia's last policy
meeting confirmed it had discussed cutting rates and buying
longer-dated debt to support the economy and restrain the
currency.

The pound edged down versus the dollar and euro, as Brexit
negotiations were stuck in limbo. The British government has
said it sees no basis to restart trade talks with the European
Union unless there is a fundamental change in approach.

Euro zone government bond yields rose, with the benchmark
10-year German yield holding near recent seven-month lows at
-0.623%.

Gold edged down while oil prices were little changed after
three days of declines on fears that a resurgence of COVID-19
infections would stifle the recovery in fuel demand.

Brent crude futures were trading down 2 cents, or
0.4%, at $42.44 a barrel by 0748 GMT, recovering ground after
falling as low as $42.19 earlier in the session.

(Reporting by Elizabeth Howcroft, editing by Larry King)

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