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LDP loses majority in Japan; yen hits 153/dollar

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Oil slides on restrained Israel strike, Europe airlines up

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'Magnificent 7' earnings, US jobs data in focus

(Updates prices at 1118 GMT)

By Amanda Cooper

LONDON, Oct 28 (Reuters) - Global stocks rose on Monday

at the start of a week stacked with earnings from Wall Street's

"Magnificent 7", while the yen eased after an election in Japan

thrust the country into political turmoil, and oil slid as

tensions in the Middle East ebbed.

The dollar, which is heading towards a 3.6% monthly rise

against a basket of major currencies in October, hit a

three-month peak against the yen at 153.885, after

Japan's ruling Liberal Democratic Party (LDP) lost its

parliamentary majority.

Oil prices fell by as much as 6.3% after Israel's response

to an Oct. 1 Iranian missile attack focused, so far, on missile

factories and other sites near Tehran, rather than on refineries

or nuclear targets.

U.S. stock index futures pointed to an upbeat

start on Wall Street later, up 0.5-0.7%, while Europe's STOXX

600 tilted lower, down 0.1% as gains in airline stocks

were offset by losses in energy shares.

With the U.S. presidential election just over a week away

and a key read of employment on Friday, investors were wary of

tugging stocks or bonds too far in one direction or the other.

"There'll be plenty to test the market nerves with this

week's bumper set of data releases, including U.S. payrolls on

Friday, and earnings reports, with five of the Magnificent 7

reporting. Meanwhile, the tight U.S. election campaign will

enter its final stretch," Deutsche Bank strategist Jim Reid

said.

The "Magnificent Seven" are the largest U.S. companies by

market value. The five set to report earnings this week are

Google parent Alphabet, Microsoft ( MSFT ), Facebook

owner Meta, Apple ( AAPL ) and Amazon ( AMZN ).

"One market fear that has eased over the weekend is

escalation risks in the Middle East. This comes as overnight

into Saturday Israel carried out retaliatory strikes against

Iran, but with these targeting military facilities and avoiding

oil or nuclear installations."

In Japan, Tokyo's Nikkei closed up 1.8%, after

initially dipping following the weakest election result since

2009 for the LDP, which has governed the country for most of the

post-war era.

The party, with junior coalition partner Komeito, won 215

lower-house seats in Sunday's election, public broadcaster NHK

reported, well short of the 233 needed for a majority.

The yen weakened sharply, leaving the dollar up as much as

1% earlier in the day, since investors figured any government

that emerges is likely to make a dovish shift in economic

policy.

"The markets are likely to think this means more trouble for

the yen with 155 the first target and (the finance ministry's)

line in the sand at 160," said Bob Savage, head of markets

strategy and insights at BNY in a note.

Nomura analyst Yusuke Miyairi also expects the Bank of

Japan, which reviews policy on Thursday, will be more dovish and

that will hurt the yen.

RISING DOLLAR

Broader currency markets were steady, leaving the dollar on

course for its largest monthly rise in 2-1/2 years as signs of

strength in the U.S. economy and the prospect of a Donald Trump

presidency have driven up U.S. yields.

While markets have started pricing in a second Trump

administration in recent weeks, Vice President Kamala Harris is

leading Trump nationally by a marginal 46% to 43%, a recent

Reuters/Ipsos poll showed.

Benchmark 10-year Treasury yields are up nearly

45 bps this month, partly down to the growing chances of a Trump

win, but also as U.S. data has shown the economy remains

resilient and, as such, interest rates could fall a lot more

slowly than many thought just a few weeks ago.

Friday's monthly employment report could reinforce that

view.

The 10-year Treasury note was last yielding

4.26%, up 2.4 bps on the day.

In Europe, French 10-year bond yields dipped 1.7 bps to

3.023%, shrugging off a decision by ratings agency Moody's on

Friday to lower its outlook on French sovereign debt.

Gold, which hit record highs last week, hovered just

shy of those levels at $2,732 an ounce.