A look at the day ahead in U.S. and global markets from Mike Dolan

Wall Street stocks are grinding out new records as U.S. growth continues to outperform, interest rate cut optimism has been rekindled at the margins and investors raise eyebrows at overseas turbulence in French politics and Chinese trade.

U.S. equity indexes seem to be basking in a post-election, year-end glow that's seen volatility gauges subside to their lowest levels since July - with the VIX 'fear index' now some six points below its historical averages.

Although U.S. manufacturing remains in the doldrums, the latest survey from ISM showed the contraction moderating - in marked contrast to equivalent European surveys released earlier.

As the factory gloom lifts, overall growth estimates are back on the rise - with the Atlanta Federal Reserve's 'GDPNow' model putting the annualised expansion in the current quarter at almost 3.2% - faster than the 2.8% recorded for Q3.

And even though Treasury yields perked up a bit on Tuesday, long-dated borrowing costs have plunged by more than 25 basis points over the past fortnight, perhaps in part as a backwash from rising overseas growth worries due to fears of a looming global trade war.

Through the noise, Fed comments overnight seemed to encourage hopes for another rate cut this month, nudging futures pricing up to show almost a 75% chance of another move.

"As of today, I am leaning toward continuing the work we have started in returning monetary policy to a more neutral setting," Fed Governor Christopher Waller said. "Cutting again will only mean that we aren't pressing on the brake pedal quite as hard."

Fed Chair Jerome Powell is set to add his voice to the debate with public remarks in New York on Wednesday, just as the week's big labor market updates stream in, starting with today's October job openings report.

ATTENTION ON FRANCE

But market attention in Europe was squarely on France, as it looks likely the standing government there could fall this week as it faces a 'no-confidence' vote as soon as Wednesday due to the ongoing parliamentary impasse over the annual budget.

French government bonds are underperforming, with the 10-year yield spread over German equivalents on Monday touching the widest since the height of the euro crisis 12 years ago.

But while the debt is underperforming surging German bunds and other euro peers, French government borrowing rates have actually been tumbling nonetheless - with 10-year nominal yields down almost 25bps over the past month and off almost half a percentage from midyear peaks.

That defuses the sense of crisis on the financial side at least, even if wider spreads are irksome to the relative funding costs of French banks.

French stocks and the euro caught a break on Tuesday, both bouncing back a touch, and the French/German debt spread compressed a bit too.

Even if the French government does fall due to far right and far left votes against it this week, a basic holding budget can still be pushed through this month, while another election can't be held until the middle of next year.

Part of the reason for sinking borrowing costs overall is that political stalemate in Paris - together with expected German elections early next year - just adds to regional growth worries, already heightened by trade war worries, auto sector troubles and geopolitical tensions.

And all of that just heaps pressure on the European Central Bank to keep cutting rates further, possibly even raising the size of those cuts this month.

ECB board member Piero Cipollone said on Tuesday that U.S. President-elect Donald Trump's planned tariffs would both lower euro zone economic growth and inflation.

Those tariff worries are all the greater in China, already hit by another round of chip sector investment curbs by the outgoing Joe Biden administration this week.

With expectations of another round of monetary easing from the Chinese central bank mounting and Chinese 10-year debt yields below 2% for the first time, the offshore yuan is tumbling against the dollar and hit its weakest level of the year on Tuesday.

China's main stock indexes initially fell as chipmakers wobbled on the latest U.S. clampdown, but then rallied at the close. The focus is also shifting to Chinese retaliation.

On Tuesday, China said it will ban exports to the U.S. of items related to gallium, germanium, antimony and superhard materials that have potential military applications.

U.S. stock futures were steady to higher ahead of the bell, retaining the bulk of the latest push to new records.

Key developments that should provide more direction to U.S. markets later on Tuesday:

* US October JOLTS job openings data, Brazil Q3 GDP, Mexico October jobless

* Federal Reserve Board Governor Adriana Kugler and Chicago Fed President Austan Goolsbee speak

* Allied foreign ministers meet at NATO headquarters in Brussels

* US corporate earnings: Salesforce

(Editing by Bernadette Baum)