(Updates prices, changes comments, byline, dateline, previousLONDON)
* U.S. data drags crude prices lower
* U.S. stocks off lows; Europe edges up
* Steel stocks rally on Wall Street
By Rodrigo Campos
NEW YORK, March 7 (Reuters) - A key gauge of world stockmarkets slipped on Wednesday after a strong advocate of freetrade resigned from the White House, fanning fears that U.S.President Donald Trump will proceed with protectionist tariffsand risk a global trade war.
But the U.S. dollar recovered most of its overnight lossesas some investors wagered that even with the departure ofTrump's chief economic adviser Gary Cohn, the president's hardtalk could be a tactic amid ongoing trade negotiations withCanada and Mexico.
Oil prices fell more than 2 percent after U.S. governmentdata showed an increase in crude inventories and output, thoughstockpiles rose less than expected.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed0.20 percent, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.35 percent.
Cohn's resignation became public on Tuesday, but he andTrump had been discussing his possible departure for weeks, aWhite House official said. the eyes of the market, (Cohn) was viewed as the adultin the room on many items," said Gene Tannuzzo, senior portfoliomanager at Columbia Threadneedle Investments in Minneapolis.
"This should create a greater risk premium in the currencymarkets for countries that depend heavily on the U.S. fortrade," he said, noting the morning declines in the Mexican andCanadian currencies.
Those two recovered early losses, with the Mexican pesoturning higher against the dollar after the White House said thesteel and aluminum tariffs could exclude both U.S. neighbors.
Against the greenback, the Mexican peso MXN= gained 0.05percent to 18.73 and the Canadian dollar CAD=D4 fell 0.33percent to 1.29 per U.S. dollar.
However, the overall outlook for the U.S. currency was notupbeat. Goldman Sachs (NYSE:GS) analysts said in a Wednesday note thattariffs similar to those proposed by Trump have usually beenassociated with subsequent currency weakness.
"We therefore see the latest news as an additional reason toremain cautious on the outlook for the broad dollar," accordingto Goldman's note.
The dollar index .DXY , which tracks the greenback againsta basket of other major currencies, fell 0.02 percent, with theeuro EUR= up 0.06 percent to $1.241.
The Japanese yen JPY= strengthened 0.03 percent versus thegreenback at 106.11 per dollar, while sterling GBP= was lasttrading at $1.3902, up 0.12 percent on the day.
OIL, GOLD DROP
Steel sector stocks .SPCOMSTEEL rose sharply on WallStreet, but not enough to keep the major U.S. indexes afloat onlingering concern that a protracted trade war would weaken theU.S. and global economies.
Losses on the S&P 500 were as deep as 1 percent at onepoint, but have ebbed and flowed as traders look for clues onthe future of trade policy in the day's headlines.
Equities got a bid after White House trade adviser PeterNavarro, who favors strong tariffs, said in a Bloomberginterview he was not a candidate to replace Cohn.
"The market sees him (Navarro) as a very protectionist type.If he's not in the running, the market seems to like that," saidJoe Saluzzi, co-manager of trading at Themis Trading in Chatham,New Jersey.
Jason Ware, chief investment officer at Albion Financial inUtah, said that with Trump keeping a close eye on stock indexes,selling sparked by tariff and trade war talks could change thepresident's mind.
"Indeed, here is a president who judges his success by usingthe stock market as an important barometer for that. So if themarket votes an overwhelming vote of no confidence on thesetariffs, is there a chance that things change next week?"
“I suspect that it's still a fluid situation," Ware said.
The Dow Jones Industrial Average .DJI fell 106.72 points,or 0.43 percent, to 24,777.4, the S&P 500 .SPX lost 5.46points, or 0.20 percent, to 2,722.66 and the Nasdaq Composite .IXIC added 14.36 points, or 0.19 percent, to 7,386.37.
European car makers .SXAP ended up 0.6 percent after dropping more than 1 percent on the risk of a hike in tariffs onexports to the United States.
Emerging market stocks .MSCIEF lost 0.45 percent. MSCI'sbroadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.56 percent lower, while Japan's Nikkei .N225 lost 0.77 percent.
Oil prices fell after U.S. government data showed anincrease in inventories, with Washington's plans for importtariffs weighing further on investor sentiment.
U.S. crude CLc1 fell 2.19 percent to $61.23 per barrel andBrent LCOc1 was last at $64.45, down 2.04 percent.
Benchmark 10-year U.S. Treasury notes US10YT=RR last fell2/32 in price to yield 2.8827 percent, from 2.877 percent lateon Tuesday.
The 30-year bond US30YT=RR last fell 10/32 in price toyield 3.1514 percent, from 3.136 percent late on Tuesday.
Spot gold XAU= dropped 0.7 percent to $1,324.41 an ounce.U.S. gold futures GCcv1 fell 0.75 percent to $1,325.20.
Copper CMCU3 lost 0.90 percent to $6,941.00 a tonne.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Global assets in 2018
http://tmsnrt.rs/2jvdmXlGlobal currencies vs. dollar
http://tmsnrt.rs/2egbfVhGlobal bonds dashboard (DO NOT USE UNTIL UPDATE FOUND)
http://tmsnrt.rs/2fPTds0Emerging markets in 2018
http://tmsnrt.rs/2ihRugVMSCI All Country Wolrd Index Market Cap
http://tmsnrt.rs/2EmTD6j
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