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* European stocks bounce after 3-day rout
* Germany's DAX up 1% as Bayer surges on $3.9 billion deal
* Glencore profit sinks, hits miners (Updates to close)
By Susan Mathew and Shreyashi Sanyal
Aug 7 (Reuters) - European shares rose on Wednesday, breaking a three-day losing streak on euphoria over a multi-billion dollar German chemical deal but gave up some gains after Wall Street opened sharply lower on recession worries.
The pan-European STOXX 600 index closed 0.2% higher, after having gained as much as 1% during the session when Bayer and Lanxess' deal to sell chemical park operator Currenta for $3.9 billion had lifted stocks.
Bayer's 6% jump was the biggest boost to the main index and helped Germany's DAX shrug off week industrial output data.
However, all major country indexes in Europe cut some gains, with Italian and Swiss stocks turning negative, after U.S. stocks plunged as investors were spooked by the latest signals from bond markets that pointed to heightened risk of a recession.
Investors have been scooping up U.S. government debt since last week on bets the Federal Reserve would need to cut interest rates more than it has signalled so far, in a bid to combat risks from the escalating trade war between China and the United States.
"With such a bad U.S. open and with the dominant story in the last few days being about U.S.-China trade war, the European markets have been looking at the U.S. for cues," said Spreadex analyst Connor Campbell.
In Europe, German long-dated bond yields tumbled to new record lows as a large rate cut from New Zealand and weak German data gave further impetus to a relentless rally in bond markets.
"We are potentially in the eye of the storm at the moment and investors are wary that another price tanking headline could be coming at any moment."
A sell-off in stocks since last week when U.S. President Donald Trump threatened more tariffs on Chinese goods is reminiscent of a sharp fall in May when a sudden breakdown in trade talks had seen European markets post their worst month in more than three years.
Europe's main index has lost about 5% since last Friday. In May, it lost 5.7%.
A continued slide in iron ore and oil prices weighed on material and energy stocks, with Glencore Plc's 0.9% slip on a 32% drop in first-half core profit adding to the material sector's 1% fall.
Novartis was the biggest weight on STOXX 600 after the Swiss drugmaker said it knew about discrepancies in data submitted to regulators as it sought approval of its more than $2 million gene therapy Zolgensma.
In Italy, biggest lender UniCredit lagged after it cut its revenue target for 2019, but a sharp rise in net profit at Italian lender Banco BPM saw its shares post their best day in over a month.
Reporting by Agamoni Ghosh, Shreyashi Sanyal and Susan Mathew in Bengaluru; editing by Patrick Graham and Stephen Powell