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GLOBAL MARKETS-Stocks gain on hopes for progress in trade war and Brexit

By Tom Wilson

* MSCI world index up 0.2%

* Euro STOXX 600, Asian shares gain 0.3%

* Investors eye limited U.S.-China trade deal

* See chances of no-deal Brexit receding

* Pound hits 5-1/2 month high after recovering losses

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Wilson

LONDON, Oct 21 (Reuters) - World shares nudged higher on Monday, as hopes for progress towards resolving the U.S.-China trade war and a belief that Britain will avoid a disorderly exit from the European Union gave cause for riskier bets.

MSCI's world equity index, which tracks shares in 47 countries, gained 0.2%, with the broad Euro STOXX 600 adding 0.3%.

The positive mood mirrored gains for Asian stocks. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3%, with Chinese shares gaining 0.3%.

Appetite for riskier assets was also supported as markets judged the chances of a disruptive "no deal" Brexit as lowering, even after Britain's parliament delayed a vote on Prime Minister Boris Johnson's deal to exit the EU.

Johnson will seek to put his Brexit deal to a vote on Monday, with the government proposing a debate on the agreement. Parliament was due to open at 1330 GMT.

It was unclear, though, whether parliament's speaker would allow a vote to go ahead.

Earlier in Asia, investors were boosted by Chinese vice premier Liu He's comments on Friday that Beijing will collaborate with the United States to address mutual concerns on the trade war.

U.S. President Donald Trump had on Friday also struck an optimistic tone, saying he thought a trade deal would be signed before an Asia-Pacific Economic Cooperation meeting in Chile next month.

"They seem to making progress," said Jeremy Gatto, an investment manager at Unigestion in Geneva. "But we have seen in past that everything seems to look great and then a couple of days later seems to deteriorate again."

The 2020 U.S. presidential election was also influencing the talks, investors said, with Trump looking to avoid the possibility of tariffs imposed by China impacting his voting base.

"Trump realises that some of the tariffs that potentially could be implemented towards the end of the year could affect the consumer, which would be bad for the U.S. economy - and obviously bad for him," Gatto said.

Wall Street futures were looking positive, too, indicating slim gains of around 0.3%.

Markets were also gearing up for high-profile earnings reports this week from firms including Microsoft and Amazon.


POUND TOUCHES 5-1/2 MONTH PEAK

By 0845 GMT, the pound had surged to $1.301, recovering earlier losses of half a percent against the dollar.

Sterling had by Friday risen by up to 6.5% in seven trading days to a five-month high, underscoring market expectations that either a deal or delay was most likely.

Goldman Sachs said it now sees the chance of a no-deal Brexit reduced to 5%, from 10% previously.

Still, some investors said that sterling's medium-term prospects were limited, even if no deal is avoided.

"I wouldn't be too bullish because there is still going to be a huge amount of uncertainty going forward, even if the current deal is agreed," said Tim Drayson, head of economics at Legal & General Investment Management.

"If this deal does go through, ultimately it is still a relatively hard Brexit - we are out of the customs union - and it is still a deterioration in the UK terms of trade."

The dollar against a basket of six major currencies was flat.

Bond markets also reacted to Brexit developments, with euro zone bond yields rising on the receding risk of a British no-deal exit.

The benchmark 10-year German government bond yield rose 5 basis points to -0.34%, while other core euro zone yields were also higher.

In commodities, oil prices largely held steady on Monday, recouping some early losses as investors took stock of global economic pressures that could impact oil demand.

Global benchmark Brent crude oil futures were down 12 cents to $59.35 a barrel by 0815 GMT.

For Reuters Live Markets blog on European and UK stock markets, click on: (Reporting by Tom Wilson; Editing by Alison Williams)