*

European stocks and euro inch higher as France passes test

*

Equities also buoyed by AI hopes, US bank earnings

*

Gold gains, dollar sputters as Trump declares trade war on

China

*

Oil off 5-month low as Trump says India to halt Russian

oil

buying

(Updates after French government passes confidence vote, ahead

of Wall Street trading)

By Marc Jones

LONDON, Oct 16 (Reuters) - World stocks shuffled back

towards all-time highs on Thursday as AI optimism trumped

simmering U.S.-China trade tensions again and France's fragile

government survived a crucial confidence vote in Europe.

The appeal of safe-haven gold showed little sign of abating,

however, while the dollar dipped for a third day running and oil

prices climbed after U.S. President Donald Trump said India had

pledged to stop buying Russian oil.

French Prime Minister Sebastien Lecornu's success in a

confidence vote was enough to cap a four-day bond market rally

that has driven euro zone borrowing costs to their lowest level

in months.

Lecornu's survival came at a cost though. He had secured

crucial backing from the Socialist Party after pledging to

suspend President Emmanuel Macron's contested increase in the

retirement age to 64 from 62 by 2030.

State Street's head of global macro strategy, Michael

Metcalfe, said the situation in France should now stabilise, at

least for a while.

"At least they have managed to come to some compromise which

removes the risk of a snap election," Metcalfe said, adding the

market was also now looking at whether the dollar begins to fall

back again.

"Have we seen a stabilisation of dollar sentiment, or has it

(a modest bounce this month) just been a reflection of higher

political uncertainty outside the U.S.?" he said, also pointing

to recent drama in Japan.

AI MEGATREND STRENGTHENING

There had been developments on that front overnight too.

Japan's Nikkei jumped 1.3% and the yen edged

down in Tokyo trading as prospects appeared to brighten for

Sanae Takaichi to become Japan's first woman premier, stoking

bets on a revival in big spending and loose monetary policy.

Chip- and artificial intelligence-related shares also

provided a boost, as Taiwanese chipmaker TSMC, whose

customers include Nvidia ( NVDA ) and Apple ( AAPL ), reported

record earnings as Asian trading had been winding down.

Its CEO said conviction in the "AI megatrend" was

"strengthening", as it raised its 2025 revenue guidance to

mid-30% growth in U.S. dollar terms from around 30%, and

maintained its pledge to spend up to $42 billion this year.

"AI demand actually continues to be very strong - more

strong than we thought three months ago," CEO C.C. Wei told an

earnings call.

That filtered into U.S. stock index futures, which were

pointing to steady gains for Wall Street when trading resumes.

South Korea's tech-dominated KOSPI had jumped 2.5%

to its own record peak overnight too after the country's chief

presidential policy adviser said he was "optimistic" about

finalising a trade deal with the United States.

Australian stocks added nearly 1% and also reached a

record high after poor jobs data improved the odds in favour of

more central bank interest rate cuts. That also dragged down the

Aussie dollar.

"Nobody forecast the unemployment drop," Societe Generale's

Kit Juckes said, adding that the yen now looked "stuck" because

there will be "a minority government that wants fiscal stimulus

and doesn't want rate hikes."

GOLD SURGE CONTINUES

Record-high gold added to its more than 60% surge this year

as it reached an unprecedented $4,241.77 per ounce.

The dollar meanwhile sagged for a third straight session,

dropping 0.2% against a basket of major peers.

Investors were still eying Fed rate cuts and scrutinising

China's latest rare earth export controls, a move sharply

criticised by senior U.S. officials on Wednesday, who warned

that it could disrupt global supply chains.

"The question for financial markets is whether China's

proposed export controls on rare earths are merely part of a

bargaining ploy to achieve greater concessions from the U.S.,"

said Chris Turner, global head of markets at ING.

Amid the tit-for-tat, Trump still expects to meet Chinese

President Xi Jinping in South Korea this month, U.S. Treasury

Secretary Scott Bessent said.

Trump's trade manoeuvres also lifted oil off five-month

lows, with Brent crude futures up 0.4% at $62.13 a

barrel and U.S. West Texas Intermediate (WTI) futures

adding 0.7% to trade at $58.69.

Trump had said on Wednesday that India would halt oil

purchases from its top supplier Russia, and Washington would

next try to get China to do the same as it intensifies efforts

to pressure Moscow into a peace deal in Ukraine.

(Additional reporting by Kevin Buckland in Tokyo; Editing by

Joe Bavier)