GLOBAL MARKETS-Stocks bounce back as Trump downplays U.S.-China trade fight

* MSCI global stock index rebounds after hitting two-month
low
* Trump calls trade war 'little squabble,' says talks
ongoing
* Italian concerns weigh down euro; dollar index rises
* Oil prices rise on drone attack on Saudi Aramco facilities

(Updates to close of U.S. trading)
By Lewis Krauskopf
NEW YORK, May 14 (Reuters) - U.S. and European stocks
regained ground on Tuesday after President Donald Trump
downplayed the U.S.-China trade war as "a little squabble" a day
after a spike in tensions between the world's two largest
economies rattled financial markets.
Fears that the United States and China were spiraling into a
fiercer, more protracted trade dispute that could derail the
global economy have shaken investors in the past week. On
Monday, MSCI's gauge of stocks across the globe .MIWD00000PUS
posted its biggest one-day decline in over five months and
touched a two-month low. The MSCI index gained 0.49% on Tuesday.
Trump insisted trade talks with China had not collapsed,
while China's Foreign Ministry spokesman said the two sides had
agreed to continue pursuing relevant discussions. This followed
Washington's decision last week to hike its levies on $200
billion of Chinese imports to 25% from 10%.
On Wall Street, technology stocks led the rebound but major
indexes finished below their session highs. The Dow Jones
Industrial Average .DJI rose 207.06 points, or 0.82%, to
25,532.05, the S&P 500 .SPX gained 22.54 points, or 0.80%, to
2,834.41 and the Nasdaq Composite .IXIC added 87.47 points, or
1.14%, to 7,734.49.
“It's a nice bounce-back certainly after yesterday for
sure," said Gary Bradshaw, portfolio manager of Hodges Capital
Management in Dallas. "It seems like President Trump has been
more jovial and more upbeat in making comments that hopefully
will get this trade situation squared away. I think that's got
investors buying the dip.”
The pan-European STOXX 600 index .STOXX rose 1.01%.
The U.S. benchmark S&P 500 recorded its biggest one-day loss
since Jan 3 on Monday, after China struck back in the trade
dispute by saying it would impose higher tariffs on a range of
U.S. goods. “It's likely that it will take markets a day or two to
adjust to this increased rhetoric around trade, because markets
up until a week ago thought that trade had been put to bed,”
said Carol Schleif, deputy chief investment officer with Abbot
Downing in Minneapolis.
In another sign trade tensions are hurting the economic
outlook, Germany's ZEW institute said investors' mood had
deteriorated unexpectedly in May. In currencies, the dollar index .DXY , which measures the
greenback against a basket of currencies, rose 0.2%, with the
euro EUR= down 0.15% to $1.1206.
The euro slid after Italy's deputy prime minister said the
country was ready to break European Union budget rules if
necessary to spur employment. Italian government bond yields
rose sharply. Benchmark U.S. 10-year Treasury notes US10YT=RR last fell
3/32 in price to yield 2.4139%, from 2.405% late on Monday.
Oil prices climbed after top exporter Saudi Arabia said
explosives-laden drones launched by a Yemeni armed movement
aligned to Iran had attacked facilities belonging to state oil
company Aramco. U.S. crude CLcv1 settled up 1.2% at $61.78 a barrel, while
Brent LCOcv1 settled at $71.24, up 1.4%.

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Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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