Updates ahead of UK budget

By Marc Jones

LONDON, Nov 26 (Reuters) - Growing U.S. rate cut bets lifted world stocks for a fourth straight day on Wednesday, while in Europe hopes were growing for a Ukraine peace deal and UK markets were bracing for a bruising budget later.

Europe's early 0.2%-0.4% gains echoed the day's 0.3% rise for MSCI's world stocks index .MIWD00000PUS as gains in Asia, and from Wall Street, extended this week's easing of recent AI and tech jitters.

Focus was already turning to the UK budget, expected to begin around 1230 GMT, for what will be a high-wire act for its under-pressure government and finance minister Rachel Reeves.

Little more than a year after ordering 40 billion pounds ($52.7 billion) of tax hikes - the biggest since the 1990s and which she promised would be a one-off - Reeves is expected to pile on another 20-30 billion pounds of increases to try and plug the fiscal dam.

Traders preempted it all by nudging sterling to $1.3170 GBP=, although investors in UK government bonds, the FTSE 100 .FTSE and FTSE 350 .FTSE350 were all waiting nervously to see how much gets raised and who pays for it.

"Bond markets will be watching very closely, ultimately being the arbiter as to whether the Chancellor has done enough to put the country’s debt on a sustainable path," said Oliver Faizallah, Head of Fixed Income Research at Charles Stanley.

The day's other main moves saw the yen, which has been on a downward spiral in recent weeks, rally 0.2% against the U.S. dollar as sources told Reuters the Bank of Japan is preparing markets for a possible rate hike as soon as next month.

That would shift the central bank to more hawkish ground and comes after a meeting last week between new Prime Minister Sanae Takaichi and BOJ Governor Kazuo Ueda.

Takaichi's high approval ratings are also prompting Japanese opposition parties to ramp up preparations for snap elections, the Yomiuri newspaper reported on Wednesday.

The kiwi dollar surged 1.2% after the Reserve Bank of New Zealand cut interest rates 25 basis points to 2.25%, but removed its dovish guidance, signalling an end to the central bank's easing cycle.

Its antipodean neighbour, the Aussie dollar AUD=, jumped 0.5% too after a hotter-than-expected inflation report reinforced bets that rate cuts are over for the time being there as well.

Oil prices remained choppy. Brent had hit a five-week low after Ukrainian President Volodymyr Zelenskiy had signalled on Tuesday he was ready to advance a U.S.-backed peace plan.

That could pave the way for a relaxation of sanctions on Russian oil firms. Brent was at $62.50 LCOc1 in London trading. U.S. President Donald Trump also said on Tuesday a deal was near, but investors know there remains a long way to go.

RATE EXPECTATIONS

The day's broader rise in market sentiment came after U.S. retail sales rose less than expected and consumer confidence sagged, firming up expectations for another Fed interest rate cut next month.

Fed funds futures now price an implied 80.7% probability of a 25-basis-point cut at the Fed's December 10 meeting, compared to even odds a week ago, according to the CME Group's FedWatch tool.

The yield on benchmark 10-year Treasury notes US10YT=RR hovered at 4.009%, little changed from its U.S. close of 4.002%, after it briefly broke below the 4% threshold for the first time this month.

Ahead of the UK budget, 10-year gilt yields GB10YT=RR ticked up almost 2 basis points to 4.51% having dropped more than 5 the previous day to 4.48% - their lowest in almost two weeks.

Asia's overnight share gains had been led by another 2% surge from the Nikkei .N225, although Japanese government bond short-term yields rose to the highest since the global financial crisis in 2008 as their selloff resumed.

Hong Kong and China's equities had lagged the broader stocks rally though after an underwhelming Q4 guidance from AI front-runner Alibaba 9988.HK left its shares down over 1%.

Spot gold XAU= was up 0.8% at $4,163.58 per ounce, while bitcoin BTC=, which has plummeted 30% in recent months, remained just below $87,000. GOL/

(Additional reporting by Gregor Stuart Hunter in Singapore; Editing by Conor Humphries)

((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net X/Twitter @marcjonesrtrs))