GLOBAL MARKETS-European stocks edge higher as rate cuts keep investors upbeat

By Elizabeth Howcroft

PARIS, Sept 19 (Reuters) - European stock markets made small gains on Friday, on track for a modest weekly advance after the U.S. Federal Reserve's rate cut helped to push markets higher.

The U.S. Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday, for the first time since December, while Norway and Canada also cut rates.

Wall Street closed at a record high on Thursday but during Asian trading the Nikkei .N225 retreated from record highs after the Bank of Japan flagged a further unwinding of its stimulus policies.

At 0923 GMT, the MSCI World Equity index was little changed on the day .MIWD00000PUS. The pan-European STOXX 600 was up 0.1% .STOXX, and London's FTSE 100 was flat .FTSE.

Investors are betting that central bank rate cuts will boost stocks further.

“For the next few weeks, our view is that we continue to keep risk-on orientation in our portfolios, we continue to overweight equities in the portfolio," said Amelie Derambure, senior multi-asset portfolio manager at Amundi.

"Our stance is that the market should continue to creep higher in the coming weeks, with some volatility as always.”

The Fed stopped short of endorsing market expectations for a clear string of rate cuts, emphasising a meeting-by-meeting, data-dependent approach. The Fed's tone, along with the wide range of views within the central bank, disappointed some investors, who had hoped the stock market would be boosted by a rapid shift to lower rates, analysts said.

Markets are waiting for any news of a call between Chinese President Xi Jinping and U.S. President Donald Trump, which is expected to cover the TikTok deal and tariffs.

The British pound fell, down 0.4% on the day at $1.3504 GBP=, and UK gilt yields rose, after data showed a surge in public sector borrowing.

The Bank of England on Thursday kept rates on hold, but slowed the pace at which it is unloading the government bonds it purchased in previous crises.

The U.S. dollar, which hit its lowest since 2022 this week, was a touch higher, with the U.S. dollar index up 0.2% at 97.509 =USD.

The yen strengthened against the dollar, with the pair at 147.82 JPY=.

European government bond yields rose, with Germany's 10-year yield at 2.7361% DE10YT-RR. While shorter-dated bonds have benefited from expectations for rate cuts, longer-dated bond yields have risen on investor concern about government finances.

The Bank for International Settlements warned this week that record global share prices appear increasingly disconnected from signals in the bond market that investors are concerned about government debt.

The 10-year U.S. Treasury yield was at 4.1255% US10YT=RR.

Oil prices were down, as traders' worries about fuel demand outweighed the boost oil prices would typically get from a U.S. rate cut.

Gold was up 0.4% at $3,656.4, heading for its fifth straight week of gains.

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