GLOBAL MARKETS-U.S. S&P500 heads for record high as stimulus bets lift world stocks

* Dollar slipping and stocks on the march

* MSCI AxJ +1%, Nikkei +1.85%, Hang Seng +2.3%

* U.S.-China trade talks eyed

* Asian stock markets: https://tmsnrt.rs/2zpUAr4 (Upates throughout)

By Sujata Rao

LONDON, Aug 11 (Reuters) - Futures for the U.S. S&P Global index hit a record high on Tuesday and world stocks rose to new 5-1/2 month peaks, lifted by bets on a U.S. fiscal stimulus package and calm on the Sino-U.S. diplomatic front before a crucial round of trade talks.

Investors are taking cheer from an order from President Donald Trump restoring some enhanced unemployment payments and suspending payroll taxes, setting the stage for the S&P500 index to regain its February record highs. It closed around 1% off those levels on Monday.

S&P500 futures jumped 0.7% while a pan-European equity index rose more than 2%, with auto shares leading the way after a surge in Chinese car sales.

The mood is watchful as sparring continues in the U.S. Congress over extending fiscal stimulus while economic data such as a steep drop in South Korean exports and a rise in UK jobless rates remain a cause for concern.

But upbeat comments by U.S. Treasury Secretary Steven Mnuchin on the prospects for a bipartisan stimulus deal supported Brent crude futures at near five-month highs and kept the dollar index near a one-week peak.

Commerzbank analysts said markets were shrugging off doubts over the legality of Trump's order and appeared convinced Congress would agree a deal

"Not without good reason, because in the election campaign both parties have an interest in presenting themselves well," they said.

"Who wants to be seen as the stingy bad guy even in times of great need?"

MSCI's global equity index rose 0.6% while an Asian share benchmark ex-Japan gained nearly 1%. Japan's Nikkei climbed 1.9%.

There are also hopes Beijing's sanctions on 11 U.S. citizens - a response to U.S. sanctions on Chinese individuals over the Hong Kong crackdown - may end this round of tit-for-tat moves between the two powers.

"It has left the White House untouched," said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

"That gives some relief that China is still giving some priority to the (trade deal) dialogue," he said.

U.S. and Chinese officials hold talks on Saturday to review the first six months of the Phase 1 trade deal. While China is lagging targets on energy and farm goods purchases from the United States, markets seem confident trade ties will be insulated from the diplomatic noise .

Such optimism kept safe haven assets under gentle pressure, with gold falling under $2000 an ounce, down more than 2%. Ten-year U.S. Treasury yields were near a two-week high of 0.5870% while German yields likewise rose to two-week highs

ONWARDS AND UPWARDS

Tuesday's gains follow a robust Wall Street session when the Dow and S&P500 rose and investors rotated towards value stocks and out of tech, reflecting optimism over the growth outlook.

Nasdaq futures were up 0.5%.

On currencies, the euro firmed 0.5% against the dollar after a German investor sentiment survey showed more improvement than expected. However there have been some signs of late the euro's 10% rally since March may lose steam.

One factor underpinning the dollar's decline - and equity strength - is the sharp fall in real, or inflation-adjusted, Treasury yields.

But in a danger signal for the euro-dollar rally, German real yields seem to have caught up with U.S. peers as euro zone inflation expectations have risen.

Risk-sensitive currencies, such as the Australian and New Zealand dollars, firmed while an emerging currency index firmed 2.6%.

Even the battered Turkish lira bounced 1.3% after four lossmaking sessions .

(Reporting by Sujata Rao; additional reporting by Kane Wu in Hong Kong and Tom Westbrook in Singapor; Saikat Chatterjee in London; Editing by Barbara Lewis, Kirsten Donovan)