* U.S. bond yields rise on supply, stock gains
* Turkish lira bounces after Monday drubbing, but still shaky
* Euro, sterling tick higher as dollar eases
* Oil prices gain on Iran sanctions, supply signals
* Sterling stumbles to five-month low versus euro
By Laila Kearney
NEW YORK, Aug 7 (Reuters) - Equity markets around the world climbed to approach a six-month high on Tuesday, buoyed by a rebound in Chinese stocks, while corporate earnings helped push Wall Street's benchmark S&P 500 index towards record levels.
Oil prices advanced as the United States' revived sanctions against major crude exporter Iran.
The rise in stock prices prompted investors to sell safe-haven investments ahead of the first piece of this week's $78 billion quarterly government refunding, sending U.S. Treasury yields higher.
"It's the bounce in stocks and other risky assets that caused an uptick in yields," said Mike Lorizio, head of U.S. Treasuries trading at Manulife Asset Management in Boston.
The Dow Jones Industrial Average rose 171.68 points, or 0.67 percent, to 25,673.86, the S&P 500 gained 11.49 points, or 0.40 percent, to 2,861.89 and the Nasdaq Composite added 20.95 points, or 0.27 percent, to 7,880.63.
MSCI's gauge of stocks across the globe gained 0.61 percent, while the pan-European FTSEurofirst 300 index rose 0.72 percent.
Powered by gains in technology stocks and a strong second-quarter U.S. earnings season amid economic optimism, the S&P 500 was within reach of a record peak it hit on Jan. 26.
Shares of Google's parent Alphabet, Microsoft and Facebook were up between 0.3 percent to 0.7 percent.
Chinese stocks rebounded overnight on hopes of fresh government spending, following a four-day selloff that had knocked them down about 6 percent.
Stock markets in London, Paris and Frankfurt then rose 0.7 percent to 1 percent as Europe's investors cheered both the move up in commodity stocks and results from Italy's biggest bank UniCredit
Currency markets remained volatile, although less so than in recent sessions, as the dollar dipped.
The U.S. dollar weakened against the euro as the Chinese yuan showed more stability.
The euro bounced to $1.16 from a near six-week low despite a second day of disappointing German economic data, while sterling recouped some ground after Brexit worries had pushed it to an 11-month low.
Sterling fell to a five-month low against the euro as the latter rebounded and investors fretted Britain could crash out of the European Union without securing a trade deal.
Turkey’s lira recovered as much as two percent from Monday's losses of more than five percent after Washington moved to end duty-free access to U.S. markets for some Turkish exports.
The U.S. Treasury Department will sell $34 billion in three-year notes at 1 p.m. (1700 GMT) in the largest three-year auction in eight years. It will sell a record amount of 10-year debt worth $26 billion on Wednesday, and an all-time high of $18 billion in 30-year bonds on Thursday.
Brent crude prices climbed as the U.S. revived sanctions against Iran. U.S. crude rose 0.65 percent to $69.46 per barrel and Brent was last at $74.66, up 1.23 percent.
The first batch of U.S. sanctions against Iran officially came into effect at 12:01 a.m. EST (0401 GMT) on Tuesday. They target Iran's U.S. dollar purchases, metals trading, coal, industrial software and its auto sector.
Additional reporting by Marc Jones, Ahmad Ghaddar and Helen Reid in London, Amy Caren Daniel, Richard Leong in New York