* Investors bet on progress at Sino-U.S. trade talks
* Nikkei rises to 2019 high, China blue chips bounce
* European car stocks fall 0.4 percent on U.S. fears
* Oil prices hits highest for year as supply tightens (Updates prices throughout)By Karin StroheckerLondon, Feb 18 (Reuters) - Hopes for progress in Sino-U.S.trade talks and expectations of policy stimulus from centralbanks lifted world stocks to 2 1/2- month highs on Monday,though European gains were held back by concern over the outlookfor auto makers.
MSCI's All-Country World Index rose 0.4percent after Japan's Nikkei closed up 1.8 percent atits high for the year and MSCI's index of Asian equities rosealmost 1 percent. Shanghai blue chips surged 2.7percent to their highest finish in more than six months.
Wall Street futures suggested that U.S. stocks wouldmaintain last week's gains when trading starts again on Tuesday,after Monday's holiday.
The Dow and the Nasdaq had boasted eight consecutive weeksof gains on wagers the United States and China can resolve theirprotracted trade dispute. Negotiations will resume this week, with U.S. PresidentDonald Trump saying he may extend a March 1 deadline for a deal.Both sides reported progress at last week's talks in Beijing. The mood was more subdued in Europe, where a pan-Europeanequity index inched to a four-month high . Gains werecapped by auto makers , who were hit by data showingChinese car sales fell 16 percent in January, their seventhstraight month of decline.The autos index, a bellwether for Europe's economy, fell 0.4percent. The industry was also weighed down by fears that a U.S.Commerce Department report would lead to tariffs on importedcars and auto parts. German shares slipped 0.1 percent lower . "The optimism on trade has been strong, but the underlyingeconomic data has been a lot of weaker - so you have some pushand pull factors," said David Vickers, senior portfolio managerat Russell Investments. Much focus was now on flash PMI data dueout this week, he said.
"As the bounce-back from the December lows fades ... thefundamentals now reassert (themselves)," Vickers added.
Bad economic data has fuelled expectations that the world'smost powerful central banks would deliver reflationary policiesand provide support for markets.
The need for stimulus was highlighted by data showing aslide in Singapore exports and a big drop in foreign orders forJapanese machinery goods.SLUGGISH INVESTMENTBeijing is already taking action, with China's banks makingthe most new loans on record in January in an attempt to revivesluggish investment. Minutes of the Federal Reserve's last policy meeting are dueon Wednesday and should provide more guidance on the likelihoodof rate increases this year. There is also talk the bank willkeep a much larger balance sheet than previously planned."Given the range of speakers since the January meeting whosupport `patience', the Fed minutes should reiterate a dovishmessage overall," analysts at TD Securities said in a note.The dollar was steady against the yen at 110.58 ,having backed away from a two-month top of 111.12.Sterling rose after three consecutive weeks of losses asinvestors waited for the outcome of Brexit talks between Britainand the European Union.British Prime Minister Theresa May plans to speak to everyEU leader and the European Commission chief to seek changes toher EU withdrawal agreement, after another defeat by her ownlawmakers last week.That left the dollar a shade lower at 96.731 againsta basket of currencies and away from last week's top of 97.368.On commodity markets, oil prices reached their highest thisyear, buoyed by OPEC-led supply cuts and U.S. sanctions on Iranand Venezuela. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Asia stock markets Asia-Pacific valuations ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Karin Strohecker, additional reporting by WayneCole in Sydney and Abhinav Ramnarayan in London, editing byLarry King)
Messaging: karin.strohecker.reuters.com@reuters.net))