GLOBAL MARKETS-Shares rise on trade deal hopes, dollar clings to post-Fed gains

By Stella Qiu

SYDNEY, May 8 (Reuters) - Shares in Asia rose on Thursday after U.S. President Donald Trump flagged a first trade deal in his global tariff war, while the dollar held most of its overnight gains as markets pushed out the chance of near-term rate cuts.

Nasdaq futures NQc1 erased earlier losses to rally 1.1%, while S&P 500 futures ESc1 rose 0.8%. European stock markets are set for a higher open, with the pan-European STOXX 600 .STOXX index up 0.9%.

Trump said he would announce details about a major trade deal with an unspecified country at a press conference later in the day. The New York Times reported that the deal was with Britain, which sent FTSE futures FFIc1 0.8% higher.

The president's comments came as investors anxiously await planned trade talks between Washington and Beijing on Saturday, which could mark the first step in resolving a damaging trade war between the world's top two economies.

Markets are also keeping their eyes on the Bank of England's policy meeting later in the day where expectations are for a quarter-point rate cut. Additionally, central banks in Sweden and Norway are due to deliver their policy decisions, although no changes are expected.

Overnight, in a widely expected decision, the Federal Reserve left policy rate in the 4.25%-4.5% range, but said the risks of higher inflation and unemployment had risen. Chair Jerome Powell said it isn't clear if the economy will continue its steady pace of growth, or wilt under mounting uncertainty and a possible spike in inflation.

Markets scaled back the chance of a June rate cut to just 20%, from 30% a day earlier, while a move in July is now priced at 70%, compared with a near-certainty just a week ago.

"This suggests little inclination to move until they are confident of the direction the data is heading, meaning rate cuts could be delayed, but risk being sharper when they come," said James Knightley, chief international economist at ING.

Such a scenario likely supported the longer-dated Treasury bonds, although they did retrace some of the gains overnight on Thursday. Benchmark 10-year Treasury yields US10YT=RR rose 2 basis points to 4.298%, after falling 7 bps overnight.

The hawkish Fed also gave the dollar a much needed bounce, although some selling pressure was again evident in Asia. The dollar index =USD slipped 0.1% to 99.80, having rebounded 0.3% overnight against its major peers.

On Thursday, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.3% while Japan's Nikkei .N225 gained 0.5%.

Chinese blue chips .CSI300 rose 0.7% and Hong Kong's Hang Seng .HIS increased 0.8%, recovering ground lost since Trump's "Liberation Day" tariffs last month as Beijing's rate cuts and stimulus measures helped calm trade concerns.

Overnight on Wall Street, stocks rose on reports that the Trump administration was planning to rescind and modify a Biden-era rule that curbed the export of sophisticated artificial-intelligence chips. Nvidia shares NVDA.O jumped 3%.

TRADE TALKS

On Wednesday, Trump suggested that Beijing initiated upcoming senior-level trade talks and said he was not willing to cut U.S. tariffs on Chinese goods to get Beijing to the negotiating table.

China has said earlier that it was the U.S. side that had signalled a desire to hold talks.

While Trump's comments underlined the recent mixed signals from Washington on de-escalating the Sino-U.S. trade war, analysts say the Geneva meeting could help ease tensions.

"The rest of the week will likely see investors cautiously, if not slightly auspiciously, awaiting trade talks between the U.S. and China," said Kyle Rodda, a senior analyst at Capital.com.

In commodities markets, oil prices bounced after falling more than $1 on Wednesday. U.S. crude CLc1 futures rose 0.7% to $58.50 a barrel while Brent LCOc1 was at $61.50 per barrel, up 0.6% on the day.O/R

In precious metals, gold prices =XAU rose 0.3% to $3,374.5 an ounce amid the uncertainties about Fed policy outlook, but still short of its record high of $3,500.

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