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European stocks higher, US stock futures firm

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US, Japan closed for a holiday

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Markets hope for compromise in US-China trade war

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Gold at fresh record highs

(Updates prices, gold forecast and French politics)

By Dhara Ranasinghe

LONDON, Oct 13 (Reuters) - World markets found steadier

ground on Monday after being whipsawed by broadsides in the

U.S.-China trade war, while gold hit new record highs in a sign

that uncertainty remained high.

While U.S. President Donald Trump had threatened 100%

tariffs on China from November 1 and Beijing said it could take

countermeasures, he sounded more conciliatory on Sunday, posting

that the U.S. did not want to "hurt" China.

European shares were broadly higher, while U.S.

stock futures also firmed although trading was subdued by a

holiday in Japan and the United States.

France remained in the spotlight with reappointed prime

minister Sebastien Lecornu facing pressure to get a budget deal

across the line.

"The stabilisation in markets is encouraging," said Rory

McPherson, chief investment officer at Wren Sterling in London.

"Given everything that is going on with the (U.S.

government) shutdown, and political turmoil in France and Japan,

markets have been strong. A pullback would be healthy."

Beijing defended on Sunday its curbs on exports of rare

earth elements and equipment as a response to U.S. aggression,

but stopped short of imposing new levies on U.S. products.

Goldman Sachs ( GS ) chief economist Jan Hatzius said that while he

still expected an extension of the current tariff pause, recent

developments suggested a wider range of outcomes was possible.

JAPANESE LEADERSHIP NOW IN DOUBT

Japanese markets had their own problems with the ascension

of new LDP leader Sanae Takaichi to prime minister now in doubt,

contributing to a sharp rebound in the yen and a 5% dive in

Nikkei futures on Friday.

Japan's Nikkei was closed on Monday, while MSCI's

broadest index of Asia-Pacific shares outside Japan

tumbled 1.5%.

Chinese blue chips fell 0.5%, though the rare

earth and semiconductor sectors both firmed. Data pointed to

some resilience in trade with exports rising 8.3%, almost twice

the forecast, and imports up strongly.

And in a sign that global uncertainties remained strong,

gold hit fresh record highs above $4,000 an ounce, while

Asia stocks fell sharply.

BofA commodities analysts said in a note on Monday that they

had raise their forecast for gold to $5,000 an ounce for next

year from $4,400.

U.S. stock futures pointed to a rebound on Wall Street, with

S&P 500 and Nasdaq stock futures up more than 1%

each. While the New York Stock Exchange and Nasdaq are open for

trade on Monday's Columbus Day holiday, bond markets are

closed.

Earnings season kicks off this week with major banks

reporting, including JPMorgan ( JPM ), Goldman Sachs ( GS ),

Wells Fargo ( WFC ) and Citigroup ( C/PN ).

S&P 500 companies overall are expected to have increased

earnings by 8.8% in the third quarter from a year earlier,

according to LSEG IBES, and strong results will be needed to

justify the market's high valuations.

"Our guess is you might get, at least in the very near term,

a more volatile and directionless environment for some of the

risky assets. Ultimately, whether or not you go against the

market in this environment depends on your conviction," said

Homin Lee, senior macro strategist at Lombard Odier.

FRANCE TURMOIL

Politics cast a cloud over Europe as the French presidency

announced Lecornu's new cabinet line-up on Sunday, reappointing

Roland Lescure, a close ally of Emmanuel Macron, as finance

minister.

Lecornu will face a no-confidence vote most likely on

Thursday and it's unclear if he has the votes needed to survive.

France's 10-year bond yield was little changed at around

3.47% and French stocks rallied 0.5% in a sign that

investors were holding on to hopes for some near-term political

stability.

"Even if, very big if, Lecornu now lasts longer in office

than on his first attempt, he will face an uphill struggle to

get a budget for 2026 through the divided parliament by the end

of the year," said Holger Schmieding, chief economist at

Berenberg.

Currency markets also saw some stabilisation after Friday's

rush into the traditional safe havens of the Japanese yen and

Swiss franc. The dollar rallied 0.6% to 152 yen,

having slid 1.2% on Friday from a top of 153.29.

The euro slipped 0.25% to $1.1586, while the

dollar gained 0.5% on the Swiss franc to 0.8038. The

dollar index was steady, after losing 0.6% on Friday.

In bond markets, cash Treasuries were closed for a holiday,

while government bond yields in Europe nudged up.

U.S. and European bond yields had hit multi-week lows in the

wake of Trump's tariff threat on Friday , while investors had

added to wagers on more rate cuts from the Federal Reserve.

"Interestingly, the bond market held up on Friday and that

was encouraging given the recent selloff in long-dated bonds,"

said Wren Sterling's McPherson.

Futures implied around a 98% chance of a quarter-point cut

from the Fed later this month, and a similar probability of

another move in December.

Fed Chair Jerome Powell has a chance to offer his guidance

when he speaks on the economic outlook at the NABE annual

meeting on Tuesday.

A host of other Fed members are appearing this week, along

with a who's who of central bankers attending an IMF-World Bank

meeting in Washington.

Oil prices also regained some ground on hopes the U.S. and

China would find some compromise on trade to avoid fresh

tariffs.

Brent bounced 1.7% to $63.8 a barrel, while U.S.

crude rose 1.9% to $60 per barrel.