(Refiles to fix typos in second paragraph.)
* Graphic: World FX rates in 2019
* European shares open lower; Asian shares gain
* Japanese yen up 0.5%
* Oil gainsBy Ritvik CarvalhoLONDON, Aug 27 (Reuters) - World shares gained on Tuesday assome investors held out hopes for a trade deal between theUnited States and China, even though they continued to raisetariffs on each other last week.Shares in Asia followed U.S. stocks higher on Monday, afterU.S. President Donald Trump predicted a trade deal with China.European shares recovered to trade higher after opening lower.Automakers and Italian stocks boosted the pan-European STOXXindex, which was up 0.3% by midday in London. Germany's DAX rose 0.4% and France's CAC 40 gained 0.2%. Italy's FTSE MIB rose over 1% on hopes thecountry's ruling 5-Star Movement and the opposition DemocraticParty would make a deal to form a new Italian government. MSCI'S All Country World Index , which tracksshares across 47 countries, was up 0.16% on the day.Wall Street futures last traded flat.Trump said on Monday that Chinese officials had contactedtheir U.S. trade counterparts and offered to resumenegotiations, an assertion that China declined to confirm. The comments helped temper losses in global marketsafter both sides announced new tariffs on Friday.
"Some of the moves we have seen in the summer are exaggeratedbecause of investors being away," said Ugo Lancioni, managingdirector of global fixed income and currency management atNeuberger Berman.
"Though we are lightly positioned on risk in our portfoliosgiven the `deal or no deal' situation, whether it is the tradewar, Brexit or Italy, we are wary of a snap-back rally in themarkets."Lancioni added that investors have been looking for safeassets such as gold, the Japanese yen and the Swiss franc inrecent months, so some of those assets may be overvalued.The Japanese yen , which rallies when markets turnrisk averse, was up 0.3% to the dollar. Gold, another safe haven, was 0.3% higher at $1,529.86 perounce and just off its gains the day before, which reached itshighest in more than six years. In Asia, MSCI's broadest index of Asia-Pacific sharesoutside Japan was up 0.35% after dropping 1.3%the previous day. Japan's Nikkei rose 1%.The Shanghai Composite Index rallied 1.35%, with a
boost from data showing China's industrial companies returned toprofit in July. South Korea's KOSPI added 0.4%.Markets have been quick to rally on any encouraging signsfrom trade negotiations between the U.S. and China. However,tariffs have only escalated between the two countries since2018, creating uncertainty and curbing growth."Although the continued resilience of consumers keeps usconfident in the global economic outlook, we do not see this asthe best environment for taking risk on stocks," said MarkHaefele, chief investment officer at UBS Global WealthManagement."As a result, we make three changes to our tactical assetallocation. We remove our overweight to global equities versushigh grade bonds and initiate an underweight to emerging marketstocks versus high grade bonds. Separately, we also adjust ouroverweight to select higher yielding emerging marketcurrencies."The dollar index versus a basket of six majorcurrencies stood at 97.91, falling 0.2%. The euro was0.1% higher at $1.1109 after losing 0.4% on Monday.Oil prices rose. Brent crude futures were up1.14% at $59.38 per barrel after losing 1% the previous day.U.S. crude rose 1.32% to $54.35 per barrel. (Reporting by Ritvik Carvalho; additional reporting by SaikatChatterjee in London; editing by Larry King)