(Adds oil, gold settlement prices)
* European equities rally on 750-bln-euro recovery fund
* Wall Street gains on reopening business optimism
* Oil rebounds on signs of increasing gasoline demand
By Herbert Lash and John McCrank
NEW YORK, May 28 (Reuters) - Global equity markets climbed on Thursday on optimism for a speedy economic recovery and a massive stimulus plan in Europe helped lift regional stocks and the euro, while gold rebounded on a safety bid on deteriorating U.S.-China relations.
Oil futures rose, reversing earlier losses, on signs U.S. gasoline demand is increasing despite a big surprise build in crude inventories and worries that China's new security law for Hong Kong could result in demand-dampening trade sanctions.
Gold pared earlier gains of 1% as rising stock markets dulled its safe-haven appeal, but the escalating U.S.-Chinese tensions kept bullion propped up.
China's parliament approved national security legislation for Hong Kong that democracy activists say could erode the territory's freedoms and jeopardize its role as a global financial hub. have largely turned a blind eye to renewed U.S.-China tensions and instead are focused on the reopening of business activity, said Candice Bangsund, a global asset allocation portfolio manager at Fiera Capital in Montreal.
"Stocks have maintained that positive momentum largely reflecting optimism that growth will recover as COVID lockdowns are eased and economies progressively reopen," Bangsund said. "Enhanced government stimulus announcements this week out of Europe and Japan have emboldened that risk-on trade."
The number of Americans seeking jobless benefits fell for an eighth straight week last week, but claims remained astonishingly high. Europe, the pan-regional STOXX 600 index .STOXX rose 1.64% to an 11-week high on the European Union's plan to prop up the bloc's coronavirus-hit economies with a 750-billion-euro ($828 billion) recovery fund.
The euro EUR= rose 0.75% to $1.1085, a two-month high. The dollar index =USD fell 0.505%.
MSCI's gauge of stocks across the globe .MIWD00000PUS gained 1.07%.
Stocks on Wall Street rose, though less than Europe, on gains in healthcare and technology stocks as investors bet on a swift recovery from the coronavirus-driven economic slump.
The Dow Jones Industrial Average .DJI rose 94.8 points, or 0.37%, to 25,643.07. The S&P 500 .SPX gained 21.64 points, or 0.71%, to 3,057.77, and the Nasdaq Composite .IXIC added 61.43 points, or 0.65%, to 9,473.79.
Overnight in Asia markets were subdued after U.S. Secretary of State Mike Pompeo warned Hong Kong no longer warranted special treatment under U.S. law. broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended flat. Shares in Hong Kong .HSI ended down 0.7% as Chinese shares managed to close in positive territory .SS , while Japan's Nikkei jumped 2.3%. .N .T
Euro zone bond yields were stable, with Italian borrowing costs - a key European confidence indicator - edging toward eight-week lows. Safe-haven German bonds sold off slightly. government debt yields rose as stocks gained, reducing demand for safe-haven bonds, before the Treasury is due to sell a record $38 billion of seven-year notes.
Benchmark 10-year notes US10YT=RR rose 2.6 basis points to yield 0.7031%.
Oil rose. The U.S. Energy Information Administration said crude inventories rose 7.9 million barrels in the latest week, exceeding expectations, due to a big increase in imports. But gasoline stockpiles fell unexpectedly as refiners boosted output. EIA/S
U.S. crude futures CLc1 rose 90 cents to settle at $33.71 a barrel while Brent LCOc1 rose 55 cents to settle at $35.29.
Saudi Arabia and some other OPEC oil producers are considering extending record-high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian industry sources. gold futures GCv1 settled up 0.1% at $1,728.30 an ounce.