SINGAPORE/LONDON (Reuters) - A raft of major banks and fund managers have upgraded their view on global equities, with emerging-market stocks their top pick to benefit from signs of easing in the Sino-U.S. trade dispute.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., November 13, 2019. REUTERS/Brendan McDermid

Fund manager J.P. Morgan Asset Management raised its outlook on global stocks, pointing to hopes for a breakthrough in the U.S.-China trade discussions, a reduced risk of a U.S. recession and a moderately positive earnings outlook.

The call, from the manager of $1.8 trillion in assets, comes as U.S. stock markets sit at a record high but a recent bond rally shows signs of unwinding.

“We have held a cautious view on the outlook for equity markets for much of this year ... however, the environment has shifted in recent weeks” Patrik Schowitz, global multi-asset strategist at the fund manager, said in an emailed note.

“That change likely reflects several factors, which we think has some more room to run,” he said.

Schowitz cited renewed optimism that Beijing and Washington will reach an agreement to end their trade dispute, recession risk in the U.S. dropping from an even chance to 20% to 30% and the possibility of earnings growth as the main factors. He did not specify how the upgrade would affect asset allocation nor offer target levels for equity indices.

Emerging-market equities were the most favored pick, alongside U.S. large-cap equities, Schowitz said.

Meanwhile, UBS said it was closing its underweight to emerging-market stocks and moved its overall position on equities to neutral.

“There have been material signs a U.S.-China deal is more likely, while monetary policy and economic fundamentals are also now more supportive,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “While equity prices have risen and downside risks remain, upside potential has also increased.”

Morgan Stanley also joined in, upgrading emerging-market equities to equal weight from underweight on a better global growth outlook outside the U.S., singling out South Korea which it upped to overweight.

Morgan Stanley saw the biggest potential in markets with a clearer path to earnings growth, such as developing-market stocks and Japan, or a scope for multiple re-rating on falling political risks, such as Europe.

“Neither of these factors are at play in the U.S., where we remain UW (underweight) given peak earnings risk, higher relative valuation and unique political risk to sentiment,” it added.

Rabobank also spotted signs of change, saying November’s divergence between the MSCI emerging-markets stocks index and the S&P 500 Index against the MSCI Emerging Market Currency Index, which during September and October rose in tandem, was unlikely to last.

“Either EM stocks will start to outperform U.S. equities and the ratio rises sharply or the MSCI EM FX Index falls,” it said.

World shares were close to a record high on Monday after Beijing surprised markets by trimming a key interest rate for the first time since 2015, stirring speculation that further stimulus was on the way for the world’s second-largest economy.