(Updates through afternoon U.S. trading)
By David Randall
NEW YORK, Aug 6 (Reuters) - World stock markets were mixed on Tuesday, with Wall Street making modest gains after China's central bank stepped in to stabilize the yuan, soothing fears a protracted trade spat between the U.S. and China would spill over into a currency war as well.
The small gains in the U.S. and losses in Europe followed a rout in global markets Monday after the yuan dropped past 7 to the dollar, spurring the United States to label Beijing a currency manipulator.
Safe-haven assets, including bonds, gold and currencies like the yen and Swiss franc, dipped as investors moved tentatively back into the euro, sterling and some emerging-market currencies. Yet investor sentiment remained fragile.
"I think the tipping point for a more prolonged negative trend (for risk assets) is quite close," said Hans Peterson, SEB Investment Management's head of asset allocation.
On Wall Street, the Dow Jones Industrial Average rose 126.3 points, or 0.49%, to 25,844.04, the S&P 500 gained 17.15 points, or 0.60%, to 2,861.89 and the Nasdaq Composite added 57.63 points, or 0.75%, to 7,783.67.
The pan-European STOXX 600 index lost 0.47% and MSCI's broad gauge of stocks across the globe gained 0.09%.
U.S. President Donald Trump and Treasury Secretary Steven Mnuchin said on Monday China was manipulating its currency, and that Washington would engage the International Monetary Fund to clamp down on Beijing.
"Officially labelling China a currency manipulator gives the United States a legitimate reason to take even more steps," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
"The markets are now scrambling to factor in the possibility of the United States imposing not only an additional 10% of tariffs on Chinese imports, but the figure being raised to 25%."
Goldman Sachs also said it no longer expects a trade deal to be struck before the November 2020 U.S. presidential election. Morgan Stanley said more tit-for-tat tariffs could tip the world economy into recession by the middle of next year.
Though U.S. Treasury yields had edged back up to 1.74% from October 2016 lows of 1.672%, German yields stayed down at minus 0.54%. Markets are now pricing in a 100% chance the European Central Bank will cut its already negative interest rates again next month.
China's offshore yuan had stretched the previous day's slide, briefly weakening to 7.1382, the lowest since international trading in the Chinese currency began in 2010. But it pulled back to 7.0469 after Beijing's firmer-than-expected fixing on Tuesday.
The Japanese yen, a perceived safe-haven in times of market turmoil and political tensions, touched a seven-month high of 105.520 per dollar before dropping back as far as 106.700 in volatile trade.
Oil prices rebounded slightly from big falls in recent sessions, but Brent crude remained near seven-month lows around $60 a barrel due to escalating trade tensions between China and the United States. Brent crude oil futures rose 0.3% to $60.01 per barrel. U.S. crude rose 0.3% to $54.87.
Spot gold stalled after advancing to a six-year peak of $1,474.80 an ounce as investors sought safety.
"People are just rebalancing their portfolios in favor of bonds, gold, Japanese yen, Swiss francs and the usual safe havens," said SP Angel analyst Sergey Raevskiy.
Reporting by David Randall; Editing by Bernadette Baum