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By Selena Li and Alun John
HONG KONG/LONDON, Oct 17 (Reuters) - Stocks edged higher and bond prices slid on Tuesday as markets continued to retrace last week's moves to safe-haven assets, focusing on corporate earnings prospects and the resilience of the U.S. economy rather than tensions in the Middle East.
Europe's broad STOXX 600 index rose 0.25%, a second day of gains, after Asian stocks had climbed earlier in the day, and the S&P 500 had closed up 1% on Monday.
Those moves marked something of a reversal after world shares slid on Friday, as traders sought to derisk their positions heading into the weekend when there was scope for geopolitical developments when markets were closed.
In addition, a host of "favourable" signs from the strength of the U.S. consumer, economic growth, and interest rates supporting bank profits, gave reasons for hope, said Kerry Craig, a global market strategist at J.P. Morgan Asset Management.
However, investors are also trying to assess risks that a wider conflict breaks out in the Middle East which remains a "very fluid situation", Craig said.
Benchmark 10-year bond yields in the U.S. and Germany rose 2-3 basis points having risen 5-8 bps Monday - bond yields move inversely to prices.
The 10-year Bund yield was last 2.793%, and the 10-year Treasury yield 4.7375%, having fallen 15 basis points last week - the biggest weekly decline since mid-July - and dipped as low as 4.53%, a sharp reversal from early October's 16-year high of 4.887%.
"The basic theme in core (European) debt markets yesterday seemed to be a reversal of the risk-off tone that predominated on Friday," said Rabobank strategists in a note.
QUARTERLY RESULTS
Top of mind for investors later on Tuesday are quarterly results from Goldman Sachs and Bank of America, after JPMorgan, Wells Fargo and Citigroup solidly beat expectations last Friday.
Morgan Stanley, pharmaceutical giant Johnson & Johnson, Tesla and Netflix due later in the week.
In Middle East developments, U.S. President Joe Biden will visit Israel on Wednesday as the country prepares to escalate an offensive against Hamas militants that has raised fears of a broader conflict with Iran.
Iran's Foreign Minister said Israel would not be allowed to act in Gaza without consequences, warning of "preemptive action" by the "resistance front" in the coming hours.
Israel's shekel remained on the weak side of the 4 per dollar level it softened to for the first time since 2015 on Monday.
Russian President Vladimir Putin on Tuesday arrived in Beijing to meet with Chinese President Xi Jinping even as the war in Ukraine raged on.