Global markets: World stocks edge off highs to await US-China progress

Worldstocksedgedofftheir highest in almost two years on Tuesday, but kept record levels insight, following fresh signs that the United States andChinawere working to end a trade war dragging on theglobaleconomy.

China's Vice Premier Liu He,USTrade Representative Robert Lighthizer andUSTreasury Secretary Steven Mnuchin held a phone call on issuesrelated to a phase one trade agreement on Tuesday,Chinasaid.

This, alongside a strong Hong Kong debut for Chinese e-commerce giant Alibaba, is theworld's largest share sale this year, boostedmarketsin Asia.

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MSCI's 49-country mainworldshare index, touched its highest level in almost two years, before drifting lower as the European session wore on. Still, it remained less than 1 per centoffrecordhighshit in early 2018.

Europeanstocks, with the exception of London's FTSE, were broadly lower andUSequity futures also inched down as a note of caution returned after a strong rally fuelled by trade talk hopes.

The pan-European STOXX 600 remained within striking distance of four-yearhighs.

"The outlook is positive asworldtrade angst is the biggest negative out there, especially when you throw in loose policy, the pick-up yields for equities versus bonds and the like," said Chris Bailey, European strategist at Raymond James in London.

"However, the residual issuesare clear: The first is a reversal inworldtrade optimism, the second is that valuations become perceived as overstretched - this can easily happen given lackluster corporate earnings growth."

In Asia, Alibaba shares opened almost 7 per centhigher in Hong Kong than their issue price and at a small premium to pricing in New York. The listing has been seen as a vote of confidence in Hong Kong after months of anti-government protests that have rocked the financial hub.

A flurry of major acquisition activity has also supported sentiment in equitymarkets, with Global markets: World stocks edge off highs to await US-China progress agreeing to buyUSjeweller Tiffany for $16.2 billion and Charles Schwab Corp set to purchaseUSdiscount brokerage TD Ameritrade Holding Corp in an all-stock deal valued at $26 billion.

Still, it was the outcome ofUS-Chinatrade talks that remained the key driver forworldmarkets.

TheUSdollar gave up earlier gains as some of the optimism over an agreement faded, slipping from a two-week high of 109.205 yen hit during Asian trade.

The euro was also a touch firmer at $1.10150.

China's yuan - the currency most sensitive to the trade war - had risen to a one-week high of 7.0181 against the dollar, but was last trading at 7.0388.

"Chinaand theUSagreed on a framework to resolve their phase one issue, which is just a way of saying that they did admin work," said Sebastien Galy, senior macro strategist at Nordea Asset Management.

The United States has imposed tariffs on Chinese goods in a 16-month dispute over trade practices that the USgovernment says are unfair.Chinahas responded with its own tariffs onUSgoods.

The next important date to watch is December15, when Washington is scheduled to impose even more tariffs on Chinese goods.

Safe-haven bond yields nudged back down, also reflecting the more cautious tone among investors.

The 10-yearUSTreasury yield was last down 2 basis points on the day at around 1.75 per cent.

Elsewhere, Bitcoin, theworld's biggest cryptocurrency, dipped to $7,065, holding above six-month lows hit on Monday after the People's Bank ofChinalaunched a fresh crackdown on cryptocurrencies.

UScrude was flat at $58 a barrel. Brent crude was little changed at $63.71 per barrel.