* Global shares snap four-day losing streak on Monday
* Trade war fears ease after backlash against Trump's plan
* Euro shrugs off inconclusive Italian election
* European shares seen rising 0.5-0.8 pct
By Marc Jones
LONDON, March 6 (Reuters) - World share markets regainedground on Tuesday as news that the United States and North Koreawill meet for talks next month came on top of hopes thatPresident Donald Trump's political allies would convince him toavoid a global trade war.
The broadest gauge of global stocks, MSCI's All CountryWorld Index .MIWD00000PUS , was up more than 0.6 percent for asecond day and Wall Street ESc1 looked set for its third riserunning as the rebound gathered momentum. .N .EU .T
It gained pace as North Korea said it was willing to talk toWashington about denuclearisation and would suspend itslong-running nuclear tests while those talks were under way.
"It looks like 'risk on' sentiment is coming back," saidSaxo Bank's head of FX strategy John Hardy, also pointing to weaker safe-havens like the Japanese yen and Swiss franc. CHF=
Europe's mood was also supported after Germany reformed itscoalition government to end more than five months in politicallimbo and as the initial unease caused by a hefty election votefor anti-establishment parties in Italy ebbed.
Italian bonds outperformed IT10YT=TWEB and shares in Milanbounced almost 1.5 percent .FTMIB having slipped to asix-month low after its weekend vote.
Europe's big three - Britain's FTSE .FTSE , Germany's Dax .GDAXI and France's Cac .FCHI - were up 0.5 - 1 percenttoo, while the euro EUR= and pound GBP= both climbed as thedollar .DXY lost its footing again. /FRX
"Over and above the noise about (U.S.) protectionism we aregetting now, we would need to see real evidence it is damaginggrowth and that is going to take some time," said head of globalmacro strategy at State Street Global Markets, Michael Metcalfe.
"We have been here before in 2002 and 2003 with steeltariffs and that wasn't devastating."
Top U.S. Republicans, including House speaker Paul Ryan,urged Trump on Monday not to go ahead with tariffs on foreignimports of steel and aluminium.
Even though the president said he would not back down, hesuggested Canada and Mexico could be exempted if a new NAFTAtrade deal was agreed. There was speculation that this had beenthe main motivation behind the plan.
After Wall Street's S&P 500 had put on more than 1 percent,Asia's bourses rallied in concert overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.5 percent, snapping five straight days oflosses. Japan's Nikkei .N225 jumped 1.8 percent from afive-month low, helped too by reassurances from the head of theBank of Japan that it would not suddenly end stimulus. .T
Korean shares .MIKR00000PUS also erased the remainder ofthe hit they took after Trump's tariff warnings last week. Thecountry is seen as being among the most exposed in Asia due tothe large amount of steel it exports to the United States.
"Even in the face of such bad news, it shows the volume ofmoney in the equity market that is looking for an entry point,"said JP Morgan Asset Management's chief markets strategist forthe UK and Europe, Karen Ward.
RATE EXPECTATIONS
The threat of a trade war is not the only source of tensionfor the world's financial markets.
As the global economy steams ahead, investors have becomeincreasingly concerned that U.S. inflation, which has beensubdued since the 2008 financial crisis, could finally pick upand lead to fast interest rate hikes.
The European Central Bank meets this week and looks almostcertain later this year to end its three-year-old, 2.5 trillioneuro ($3.08 trillion) stimulus programme.
U.S. 10-year bond yields reared back up to 2.89 percentahead of U.S. trading and euro zone yields followed suit withGerman Bunds off a five-week low at 0.69 percent DE10YT=RR .
"The ECB is going to be presenting growth forecasts that arelikely to be stronger, but will be at pains to stress that themove away from monetary easing will be delicately done," saidPeter Chatwell, head of euro rates strategy at Mizuho.
The euro EUR= traded back above $1.2410, having extendedits recovery from a seven-week low of $1.2154.
In Italy, where currency traders are keeping an eye onpost-election developments as none of the three main factionshas emerged with enough seats to govern alone, the country'sPresident, Sergio Mattarella, is expected to open formalcoalition talks in April.
Early elections are possible if no coalition accord isfound.
The dollar's swoon helped the Canadian dollar CAD=D3 offan eight month low C$1.2995 it had hit on Monday as the latestround of NAFTA renegotiations fanned the trade nerves. FRX/
Canada is most exposed U.S. tariff threats but its centralbank holds a rate meeting on Wednesday and if it keeps the dooropen to further hikes, the currency "is likely to be able toresist further notable depreciation," Commerzbank (DE:CBKG) said.
In commodities, crude prices held firm, underpinned byrobust demand forecasts and prospects for informal contactssought by OPEC with U.S. shale oil producers at an industrymeeting in Houston this week.
U.S. West Texas Intermediate crude futures CLc1 traded at$63.03 per barrel, up 0.7 percent following a 2.2 percent gainon Monday. Bellwether industrial metal copper CMCU3 gained 1.5percent in easily its biggest jump in almost a month. MET/L
China's government said on Monday it was confident aboutkeeping its growth rate at around 6.5 percent this year and onTuesday defended a move to hike military spending by the biggestamount in three years. = 0.8105 euros)
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