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China stimulus announcement expected Saturday

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Bets for quarter point Fed rate cut intact after jobless

claims

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Oil volatile amid hurricanes, Middle East tensions

(Updates prices)

By Naomi Rovnick and Stella Qiu

LONDON, SYDNEY Oct 11 (Reuters) - Global stocks traded

sideways on Friday as a stunning rally in Chinese shares paused

and investors held back from placing more bets ahead of a

much-anticipated update on fiscal stimulus from Beijing this

weekend.

European stock markets were steady, Wall Street futures

were also flat and MSCI's broadest index of

Asia-Pacific shares outside Japan ended the week

with a loss after four straight weeks of gains.

The global stock index is near record highs

after a burst of late summer volatility sparked by fears of a

U.S. recession was eased by the Federal Reserve's first rate cut

of this cycle, where it cut borrowing costs by a jumbo 50 basis

points.

That first round of U.S. easing opened the door for China to

bring in monetary support measures without creating extra

pressure on the weakened renminbi.

Beijing's finance ministry has signalled it will announce a

significant fiscal stimulus at a press conference on Saturday.

Ting Lu, chief China economist at Nomura, said markets were

"laser-focused" on the outcome.

But, Lu added, the finance ministry might not be able to

detail plans for spending and bond issuance that would require

separate approval from the National People's Congress, Beijing's

top government body.

Beijing's next moves, which investors worldwide are counting

on to boost activity everywhere from Australia's iron ore mines

to luxury goods shops in London and Paris, could depend on

whether the Fed carries on with rate cuts.

Data showed core U.S. consumer prices rose by a

higher-than-expected 0.3% in September from August, signalling

the U.S. central bank might have applied a larger-than-necessary

dose of relief to an economy that is not ailing yet.

Money markets still put 80% odds on a 25 basis point rate

reduction on Nov. 7 however, after data on Thursday showed

weekly jobless claims had surged and the severe hurricanes

wreaking devastation across the U.S. also threatened the

economy.

OIL VOLATILE

The U.S. dollar, steady on Friday, hit two-month

highs overnight as money market traders dropped all their bets

for another half-point rate cut.

"A significant portion of the recent gains in equities can be

attributed to the dual tailwinds of lower interest rates and

economic stimulus from China," Lombard Odier Investment Managers

head of macro Florian Ielpo said.

"However, with inflation proving stickier than expected,

(U.S.) interest rates might face temporary upward pressure."

The yield on the interest rate-sensitive two-year

U.S.Treasury has risen for two consecutive weeks as

the price of the government debt instrument fell, although it

edged 3 bps lower on Friday to 3.7943%.

The benchmark 10-year yield fell 2 bps to 4.073%

but remains far above its level of about 3.6% in early

September.

In Europe on Friday, the Stoxx 600 share index

traded flat, still near its 52-week high as investors focused

more on prospective European Central Bank monetary easing than

an economic slowdown across the currency bloc.

With the ECB widely expected to cut its deposit rate again

next week for the second month in a row as inflation has

stalled, Germany's 10-year Bund, steady at 2.26% on

Friday, has dropped far below the 3.5% euro zone deposit rate.

Elsewhere in markets, Brent crude oil dropped 1.2% to 78.45

a barrel,, having jumped about 4% overnight as Hurricane

Milton drove a spike in U.S. fuel use and Middle East supply

risks remained high.

Gold was last up 0.6% at $2,644.69 an ounce.