LONDON, Dec 3 (Reuters) - Global financial markets were on a steadier footing on Wednesday, helped by a modest bounce in equities, a record high for copper and as the recent selloff in government bonds - and a far lengthier rout in cryptocurrencies - relented.
Overnight news that U.S. President Donald Trump's administration had abruptly cancelled interviews with finalists for the Fed chair job firmed up the view that Kevin Hassett - seen as an interest rate-cutter - will replace Jerome Powell next May.
Traders' response to that potentially dovish influence was to sell the dollar for a ninth straight day, steepening government bond yield curves and lifting risk assets from shares to metals to bitcoin after its recent woes. /FRXGVD/EU
RETAILERS LEAD EQUITY BOUNCE
Retailers (.SXRP), led Europe's equity bounce. Zara owner Inditex (ITX.MC), leapt 8.6% after it reported a strong start to winter sales while defence stocks (.SXPARO), and oil prices both climbed over 1% after Russia said the U.S.-led Ukraine peace plan did not satisfy its requirements yet.
"The market is, more than anything else, still being driven by expectations about the new Fed chair and that Hassett might get the job," Societe Generale's FX strategist Kit Juckes said,
"The view is that Trump is going to appoint someone that is going to keep rates low no matter what," Juckes added, given the desire to keep the U.S. economy motoring.
Wednesday's relative calm also meant beaten-up Japanese government bonds were more orderly overnight, though the 10-year JGB yield - which moves inversely to price - still hit its highest since June 2008 at 1.89%.
Benchmark 10-year U.S. Treasury yields were just above 4%, 2-year yields dipped to 3.5% as U.S. trading loomed, while Germany's 10-year Bund yield steadied at 2.75% after climbing to its highest since September on Tuesday.
"With the weaker dollar, dollar/yen has been tamed but your eyes continue to be pinned to the Japanese government bond yields," Saxo Bank strategist John Hardy said.
MORE DOVISH FED OUTLOOK
Bitcoin , which has crashed by almost a third since early October, reclaimed the $92,000 level to hit a two-week high in the crypto markets.
Wall Street futures also pointed to modest gains for the Nasdaq and S&P 500 later, with ISM services index and ADP employment figures due before PCE inflation data on Friday and next week's key meeting of the U.S. central bank's Federal Open Market Committee, at which markets are now 90% priced for a cut.
"I just can't see any reason why (equities) won't be well supported into the FOMC rate cut next week," said Tony Sycamore, a markets analyst at IG.
"And I think then you start to hit that really nice sweet spot in mid-December when equity markets just rally."
Investors have been pricing in their more dovish Fed outlook, on the view that White House economic adviser Hassett would deliver further rate reductions if he succeeded Powell.
Trump said on Tuesday he would announce his Fed chief nominee early next year, and that he had narrowed the list down to one person.
That kept the dollar on the back foot, lifting the yen to 155.60, sterling 0.5% higher to $1.3280 and the euro to $1.1642 as upbeat euro zone business activity data also boosted sentiment. /FRX
That was not the case in China overnight, however, where services activity printed at the slowest pace in five months and led both Chinese (.CSI300), and Hong Kong stocks (.HSI), lower.
In commodities, the 1% rise in oil prices came as markets weighed faltering Russia-Ukraine peace hopes. An end to the war would likely lead to sanctions changes and ultimately more Russian oil in global markets.
Brent crude futures were at $63 a barrel in London trading, with U.S. crude just above $59 per barrel.
Spot gold was little changed at $4,201 an ounce, while industrial bellwether metal copper jumped 1.7% to a record high of $11,338 a ton.
"Copper is looking quite bullish," Dan Smith, managing director of Commodity Market Analytics, said. "There's a decent chance prices could climb toward $12,000 a ton from here."
Additional reporting by Rae Wee in Singapore and Polina Devitt in London, editing by Ed Osmond and Alex Richardson
