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European stocks and euro inch higher ahead of France vote

Equities also buoyed by AI hopes, US bank earnings

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Gold gains, dollar sputters as Trump declares trade war on

China

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

oil

buying

By Marc Jones

LONDON, Oct 16 (Reuters) - Stocks shuffled back towards

all-time highs as solid corporate earnings helped offset

simmering U.S.-China trade tensions, while the euro ticked

higher as France's prime minister passed the first of two

crucial confidence votes on Thursday.

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

as it extended its run of record highs, although the dollar

dipped for a third day and oil rose from five-month lows after

U.S. President Donald Trump said India had pledged to stop

buying oil from Russia.

Europe's bond markets meanwhile cooled after a four-day

rally that has driven regional borrowing costs to their lowest

level in months.

The second of France's two confidence votes on

now-reinstated Prime Minister Sebastien Lecornu was looming

shortly as was a debt auction later.

State Street's head of global macro strategy, Michael

Metcalfe, said the expectation was that the situation in France

should now stabilise with Lecornu likely to pass the test

following his pledge to delay a rise in France's retirement age.

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

now, which removes the risk of a snap election," Metcalfe said,

adding the market was also now looking at whether the dollar

begins to fall 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.

HOT CHIPS

Both politics and economics had driven moves in Asia

overnight too.

Japan's Nikkei jumped 1.3% and the yen edged

down 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 trading wound down.

Its CEO said it expects robust artificial intelligence

demand to continue, 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.

South Korea's tech-dominated KOSPI jumped 2.2% to

its own record peak after the country's chief presidential

policy adviser said he was "optimistic" about ongoing talks to

finalise 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

Gold rose as much as 0.8% to reach 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 scrutinising China's latest expansion of 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 action, 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.

On Wednesday, Trump said 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.

(Editing by Joe Bavier)