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

* MSCI global stock index rebounds after hitting two-month
low
* Trump: Talks didn't collapse, tariff war 'a little
squabble'
* Italian concerns weigh down euro
* Oil prices jump on drone attack on Saudi Aramco facilities

(Updates to afternoon 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 bounced back on Tuesday
to gain 0.81%.
On Wall Street, the Dow Jones Industrial Average .DJI
climbed 347.87 points, or 1.37%, to 25,672.86, the S&P 500
.SPX gained 38.53 points, or 1.37%, to 2,850.4 and the Nasdaq
Composite .IXIC added 122.52 points, or 1.6%, to 7,769.54.
The pan-European STOXX 600 index .STOXX rose 1.01%.
Trump said 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%.
The 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 0.18%, with the
euro EUR= down 0.12% to $1.121.
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
6/32 in price to yield 2.4245%, 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 rose 1.41% to $61.90 per barrel and Brent
LCOcv1 was last at $71.41, up 1.68% on the day.

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