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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

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Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn

LONDON, July 4 (Reuters) - World stocks clocked up more

record highs on Thursday after U.S. data narrowed the odds on a

September Fed interest rate cut, while Europe was on politics

watch again as UK voters headed to the polls in national

elections.

The July 4 holiday in the United States made for thin

trading, amplified as investors sat on their hands to see just

how large a majority the Labour Party might get when the UK's

election exit poll and results start coming out around 2100 GMT.

Markets are well prepared for a change given opinion polls

have for months put the centre-left party on course for a

landslide victory over the Conservatives, who have held power

for 14 years through both Brexit and the COVID-19 pandemic.

"Having been very negative of sterling for a very long time,

institutional investors are actually going into this election

quite neutral," said Michael Metcalfe, head of macro strategy at

State Street Global Markets.

That is partly, he said, because political risk has surged

in the likes of France, which holds the second round of its

parliamentary elections in three days' time, and in the United

States ahead of its Presidential vote in November.

"The UK, oddly, has ended up with a neutral position in the

middle," Metcalfe said. "Also, I don't think at any point has

the result (of the election) been in any doubt."

UK polling stations opened at 0600 GMT and by lunchtime

London's FTSE 100 early 0.6% rise had extended to almost 1%,

while sterling had crept up to $1.2760 and 84.6 pence

per euro leaving it up almost 4% and 2.2% on the

respective currencies since April.

Additional tailwinds for the FTSE came from MSCI's main

global index, which notched up its latest record

high after Wall Street's S&P 500 and Nasdaq had done the same

ahead of the July 4 celebrations.

Across the English Channel from Britain, polls in France

suggested National Rally (RN) would not win a majority of seats

in Sunday's second round of Parliamentary election as mainstream

parties moved to block the far right.

France's bond yields, which move inversely to price and are

a proxy for government borrowing costs, still edged higher

though as the country's treasury sold 10.5 billion euros ($11.3

billion) worth of bonds into the market, although it was a

welcome sign that it all went smoothly.

French bond "spreads have been tightening and sentiment

has been a bit more positive," said Jussi Hiljanen, head of

rates strategy at lender SEB.

A hung parliament appears the most likely result in the

French elections, as left and centrist groups strike deals to

try to keep Marine Le Pen's National Rally from power.

HOT CHIPS

Car shares were on the move again as the European Union said

it plans to impose tariffs of between 17.4% and 37.6% on Chinese

electric vehicle makers like BYD, Geely

and SAIC.

There is however a four-month window during which talks

are expected to continue with Beijing, which has unsurprisingly

threatened to retaliate.

The bulls were still charged up though after chipmaker

Nvidia ( NVDA ) started Wall Street's July 4 celebrations early

by adding another 4.5% to what is now a near 160% leap in it

shares this year.

Asia then closed up nearly 1% overnight to

reach its highest since April 2022, as Japan's Nikkei

finished within spitting distance of its March peak and

Taiwan's main index also struck a record as Taiwan

Semiconductor Manufacturing Co ( TSM ) cleared T$1,000

for the first time.

The U.S. ISM measure of services activity surprised by

sliding to its lowest since mid-2020, with employment notably

weak ahead of the June payrolls report due on Friday.

Analysts cautioned the series was contradicted by strength

in the PMI survey of services, but did note that price measures

in both surveys pointed to easing inflation.

EYES ON THE SURPRISE

A run of subdued data mean Citi's U.S. economic surprise

index has sunk to -47.5, the lowest since August 2022.

Meanwhile, the closely watched Atlanta Fed's GDPNow estimate

fell to just 1.5% from 1.7%.

That should be music to the ears of the Federal Reserve,

with minutes of its last meeting showing committee members

wanted more evidence of a cooling economy before cutting rates.

At the time of that meeting, the GDPNow growth estimate was

running around 3% annualised.

"Reading through the minutes from only three weeks ago, it

is a good reminder of how quickly the activity outlook has

deteriorated," said Paul Ashworth, chief North America economist

at Capital Economics.

"Given the more encouraging personal consumption expenditure

data in May, the risk of a reacceleration in inflation seems

even less likely, particularly with GDP growth now running well

below its potential," he added. "We still think that the Fed

will begin to cut interest rates this September."

Markets quickly lifted the probability of a September rate

cut to 74%, from 65%, while pricing in 47 basis points of easing

for this year.

With the U.S. economy now seemingly less exceptional, the

dollar dropped across the board. The euro was up at $1.0797

, and away from its recent low of $1.0666, while the

dollar index hit its lowest in three weeks.

The Australian dollar was a notable gainer, touching a

six-month peak of $0.6733 at one point with markets

wagering the next move in local rates could be higher.

The yen remained out in the cold, hitting multi-year lows on

a host of currencies as investors continued to favour carry

trades. The dollar stood at 161.11 yen after striking

a 38-year top of 161.96 on Wednesday.

The drop in the dollar was a boon for commodities, with gold

rallying to $2,358 an ounce, from $2,318 at the start of

the week.

Oil prices eased a touch, having gained the previous day

when a surprisingly large decline in U.S. crude stocks pointed

to firmer demand as the U.S. driving season gets underway.

Brent dipped 43 cents to $86.93 a barrel, while U.S.

crude fell 54 cents to $83.03 per barrel.