By Marc Jones
LONDON (Reuters) - Chinese stimulus hopes lifted world stocks on Tuesday, while Britain's pound huddled near a two-month high as the UK's parliament readied for a "meaningful" vote on Prime Minister Theresa May's unpopular Brexit plans.
Most European markets were in buoyant form early on - feeding off attempts by Washington and Beijing to downplay the risks associated with their trade war and sterling's bizarrely positive twist on the looming Brexit drama.
There was a slight wobble when German data showed Europe's biggest economy saw its weakest growth in five years last year but there were plenty of other factors offsetting the news.
Despite Wall Street ending in the red overnight, Shanghai and Hong Kong stocks had gained almost 2 percent overnight - with Tokyo rising 1 percent on return from holiday and Seoul up smartly too.
That was after U.S. President Trump said on Monday he thought a trade deal with China was possible and Chinese officials came out in force on Tuesday hinting at more stimulus for their slowing economy.
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"It seems like a coordinated effort (between the U.S. and China)," said Saxo Bank's head of global equities strategy, Peter Garnry, highlighting how the Federal Reserve had also scaled back talk of multiple U.S. rate hikes.
"For now at least it seems to be working," he added, adding that China's plans to cut taxes showed policymakers were starting to wake up to its problems.
All other focus was largely on Britain's Brexit gyrations.
The pound was barely budged at $1.2860 and up 0.2 percent at 88.88 pence per euro in London having strengthened steadily in recent weeks.
Worries of the UK plunging out of the EU at the end of March without some kind of transition deal seem to have been eased but with May potentially facing the biggest defeat for a UK government plan in 95 years, uncertainty still dominates.
"We are recommending our clients not to take strong positions on the pound or the equity markets," Garnry added. The vote is due around 1900 GMT.
Euro zone government bond yields tested six-month lows after the weak German economic data. "The overall impact of Brexit on German economic growth is impossible to quantify," an official of the statistics office said in Berlin.
GOOD START
Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan recovered from early losses and advanced 1.3 percent. South Korea's Kospi hit a one-month high and Japan's Nikkei added 1 percent. [.T]
China's CSI300 index of Shanghai and Shenzhen shares ended up almost 2 percent too amid the expectations of more government policy measures to prop up a slowing economy.
China's state planner said it will aim to achieve "a good start" in the first quarter for the economy in a signal of more growth-boosting steps.
State television also quoted Chinese Premier Li Keqiang as saying the government is seeking to establish conditions helpful to meeting this year's economic goals.
That came after data on Monday showed China's exports unexpectedly fell the most in two years in December, while imports also contracted sharply.
Cyclical shares had led the broader gains. Australian financial shares also hit their highest since early December while Japanese electronics and machinery-maker shares rose to their best levels in six weeks.
"It appears some contrarian investors are starting to buy cyclicals, looking beyond the last economic slowdown," said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.
"But I would suspect there will be heavy selling if we go up further, to around 2,650 in the S&P500 and 21,500 in the Nikkei," Kuramochi added.
In commodities, meanwhile, oil prices rebounded on supply cuts by producer club OPEC and Russia. International Brent crude oil futures last were at $59.50 per barrel, up 0.8 percent from their last close. U.S. crude futures stood at just under $51 per barrel, up 0.1 percent.
(Additional reporting by Hideyuki Sano in Tokyo, editing by Ed Osmond)
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