By Helen Reid
LONDON (Reuters) - Stocks rose tentatively on Tuesday as investors picked through the rubble of conflagrations in some of the world's top economies amid uncertainty over Brexit, a China-U.S. trade war, and French protests.
Contact between China and the United States boosted stocks in Asia and Europe while sterling floundered near 20-month lows as the market sought clarity on the next steps for Brexit after Britain's prime minister postponed a vote on her deal.
China's Vice Premier Liu He spoke with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, exchanging views on the next stage of trade talks.
The sign China is moving ahead on talks with the United States helped rekindle investors' appetite for equities and boosted European stocks, while domestic British stocks lagged amid deepening political uncertainty.
Trade-sensitive industrials, materials, and consumer stocks drove the European rally.
But futures for Wall Street's S&P500 and Dow were down 0.2 percent, indicating the market was not overly hopeful for a fast solution to a trade conflict that has turned increasingly bitter in recent months.
All sectors in Europe are in the red this year after oil became the last to give up all its 2018 gains as investors licked their wounds with a bruising year nearing its close.
China's blue-chip index climbed 0.5 percent on news of contact with the United States, and MSCI's world equity index edged up 0.1 percent - set for its first day of gains after a five-day losing streak.
Growth worries still stalked markets, though.
Japan's economy provided the latest negative data point, contracting the most in over four years in the third quarter, compounding worries over a slowing global economy.
Disappointing economic data has fanned worries about corporate earnings and factory output, with the Sino-U.S. trade battle clouding the outlook for world growth.
FRENCH FOCUS
Bond markets in Europe were focused on France as investors fretted over fiscal spending after the government announced concessions aimed at defusing weeks of often violent protests.
President Emmanuel Macron announced wage rises for the poorest workers and tax cuts for pensioners.
This sent French bond yields to their highest level over Germany's in 19 months, with the spread over the safe-haven German Bund hitting 47.5 basis points.
Macron's announcement "leaves open the question about how the new fiscal measures will be covered financially," wrote UniCredit analysts.
Olivier Dussopt, junior minister for public accounts, said on BFM TV the measures would cost 8-10 billion euros ($9.1-$11.4 billion).
European investors were grappling with another crisis in Britain, meanwhile.
Sterling floundered at $1.2571 as traders sought to price in a range of possibilities after Prime Minister Theresa May's abrupt decision to postpone a parliamentary vote on her Brexit agreement on Monday, a move that sent the pound spiralling down to $1.2505.
Goldman Sachs analysts said volatility across UK assets has increased, with option markets pricing a wider range of outcomes including Brexit without a deal, a last-minute agreement or another referendum on EU membership.
May embarked on the first leg of a trip to meet European leaders on Tuesday, seeking support for changes to her Brexit deal, while at home pressure mounted on her and some lawmakers agitated for a vote of no confidence.
"The market didn't expect her to win the vote anyway," said Andrew Koch, senior fund manager at Legal & General Investment Management. "If there's a full blown leadership contest, then it'll be different."
The dollar slipped 0.1 percent to 97.078 against a basket of major currencies.
In emerging markets, stocks staged a hesitant recovery from one-month lows hit in the previous session.
The shock resignation of India's central bank governor sent India's NSE share index down in early trade, but the benchmark later pared losses and inched into positive territory.
Election results in three states were not as poor for the ruling party as some expected, helping risk appetite.
In commodities, oil prices edged further down after steep losses in the previous session. [O/R]
U.S. crude futures were down 0.4 percent at $50.84 a barrel while Brent fell 22 cents to $59.75.
For Reuters Live Markets blog on European and UK stock markets open a news window on Reuters Eikon by pressing F9 and type in 'LIVE/' in the search bar
(Reporting by Helen Reid; Editing by Andrew Cawthorne)
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