GLOBAL MARKETS-World stocks rise as Brexit deal adds to Asian cheer

* Britain and EU strike deal, paving way for trade talks

* European stocks surge 0.8 pct, following Asian stocks higher

* Dollar gains as U.S. government shutdown avoided

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Adds U.S. nonfarm payroll data, updates prices)

By Abhinav Ramnarayan

LONDON, Dec (Shanghai: 600875.SS - news) 8 (Reuters) - World stocks rose as a breakthrough in Brexit negotiations added momentum to an upswing underpinned by strong economic news from China and Japan.

Britain and the European Union struck a deal on Friday to move on to talk about trade and a transition period after they agreed the outline of their divorce deal.

Shares (Berlin: DI6.BE - news) across the continent surged on the news, and even Britain's FTSE 100 Index, which tends to move inversely with sterling, was higher through the day despite an early rally for the British currency.

At one stage sterling gained half a percent to hit a six-month high of 86.9 pence against the euro, but this completely reversed as the session went on.

"I think we've seen a classic case of the rumour being bought and the fact sold, with sterling having rallied early last week in anticipation of a deal being close," said OANDA analyst Craig Erlam.

"We could see more upside in the pound in the coming months but as it was before, the road ahead is bumpy and that will be reflected in the currency markets."

The pan-European share index rose 0.8 percent, pushing the MSCI (Frankfurt: 3HM.F - news) world equity index, which tracks shares in 47 countries, up 0.2 percent.

European banking shares were amongst the biggest gainers after financial regulators reached a long-sought deal on Thursday to harmonise global banking rules, but said the rules would take effect in 2022, later than previous expectations for 2019.

The dollar had risen earlier in the session but retraced a touch after the release of U.S. payroll data.

Job growth in the world's biggest economy increased at a strong clip in November but wage growth was a touch lower than expected.

"Because the average hourly earnings were lower than expected, we saw a bit of downward pressure on yields. I think it is more important than the jobs number, as it is a leading indicator of inflation," said Mizuho strategist Antoine Bouvet.

The yield on 10-year U.S. Treasuries also dipped slightly before rising again on this mixed picture.

"To put it in context, it is unlikely to ease concerns in the Fed that inflation dynamics are weak."

According to a Reuters survey of economists, the Labor Department's closely watched employment report is likely to show that nonfarm payrolls rose by 200,000 jobs last month after surging 261,000 in October.

The report probably will have little impact on expectations that the Federal Reserve will raise interest rates at its Dec. 12-13 policy meeting, but it could help shape the debate on monetary policy next year.

Wall Street futures pointed towards a higher open for U.S. stocks.

Earlier on Friday, Asian shares rallied for a second session in a row as economic news from China and Japan beat all expectations.

Beijing reported exports surged 12.3 percent in November from a year earlier, more than double the forecast, while imports climbed almost 18 percent.

Iron ore and copper imports enjoyed a stellar rebound, which could help stem a recent pullback in commodity prices.

Japan's Nikkei led the way as the yen eased on the dollar, rising 1.1 percent on top of Thursday's 1.45 percent bounce to be almost back where it started the week.

Revised data showed Japan's economy growing twice as fast as first thought as business spending jumped.

Gold inched up to $1,247.40, having this week breached its recent tight trading range to hit a four-month trough at $1,245.60.

Oil prices rose, helped by rising Chinese demand and as a threatened strike by oil workers in Nigeria led to short covering.

Brent futures were up 0.7 percent at $62.91 a barrel, having climbed 98 cents overnight. U.S. crude was up 71 cents at $57.40.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Abhinav Ramnarayan, Additional reporting by Wayne Cole in SYDNEY; Editing by Elaine Hardcastle and Hugh Lawson)