* European equities gain around 1%
* Trump: 'Dangerous' Huawei could be in China trade deal
* Sterling firms, dollar off 2-year highs; some respite for oil
* World FX rates in 2019 tmsnrt.rs/2egbfVh
By Karin Strohecker
LONDON, May 24 (Reuters) - World stocks edged higher on Friday and oil prices recovered from bruising falls, after U.S. President Donald Trump nurtured muted hopes of progress in U.S.-China talks while concerns over trade and the health of the world economy persisted.
Trade tensions have roiled global markets this week with the MSCI All Country index up 0.2% on the day but in line for a more than 1% fall in its third week in the red, their longest losing streak since a rout in December.
In overnight comments, Trump also labelled Chinese telecommunications giant Huawei Technologies Co Ltd "very dangerous" while adding issues with the firm might be resolved within the framework of a broader trade deal, though no high-level talks have been scheduled.
Asian bourses were torn between fears of a more protracted U.S.-China trade war and hopes the world's two largest economies would reach a deal soon. China mainland blue chips and Hong Kong stocks climbed around 0.3% while Japan's Nikkei fell 0.2%.
European stock markets were more upbeat. The pan-regional Euro Stoxx 600 index, Germany's DAX, France's CAC and Britain's FTSE 100 all rose around 1 percent.
"It might be a step too far that there is optimism over a trade deal but there may be a little more optimism over the way talks are going," Investec chief economist Philip Shaw said.
Wall Street also looked in line for a reprieve after major indexes tumbled more than 1% on Thursday as dire economic data exacerbated trade war fears. S&P 500 e-minis pointed to a 0.6% rise at the open.
Flight-to-safety plays continued to dominated global markets with the benchmark 10-year U.S. Treasury note yield hitting 2.292% overnight, the lowest level since mid-October 2017. The yield last stood at 2.3220%.
Key parts of the U.S. yield curve were inverted, flashing another warning sign about the health of the world's biggest economy.
U.S. manufacturing growth sputtered in May, data showed on Thursday, measuring its weakest pace of activity in nearly a decade, while new orders fell for the first time since August 2009.
"Fixed income safe-haven sovereign markets are the asset of choice at the moment, and although we had a recovery in European stock markets this morning, there has not been much of a retracement at all in (German) bunds or (British) gilts," Shaw said.
Washington last week effectively banned U.S. firms from doing business with Huawei, the world's largest networking gear maker, citing national security concerns.
The U.S. Commerce Department said on Thursday it was proposing a new rule to impose anti-subsidy duties on products from countries that undervalue their currencies, in another move that could penalise Chinese products.
China's Foreign Ministry on Friday denounced Washington's comments on Huawei.
Among currencies, the dollar index that measures it against six major rivals hit a high of 98.371 on Thursday U.S. time. It was last quoted a touch weaker at 97.789.
The euro, which on Thursday slumped to levels last seen in May 2017 as a recovery in euro zone business activity was weaker than expected, traded at $1.1191 on Friday.
Sterling strengthened a quarter of a percent after softening nine out of the previous 10 sessions against the dollar amid mounting pressure on Prime Minister Theresa May to name a date for her departure after a backlash over her plans for Britain's exit from the European Union.
The pound traded at $1.2687. Sterling suffered its 14th consecutive day of losses against the euro on Thursday, its longest losing streak on record. It stood at 0.8818 to the euro .
Other major currencies were relatively calm. The dollar was holding at 109.59 yen, flat on the day.
In commodity markets, oil prices gained amid OPEC supply cuts and tensions in the Middle East. Crude futures tumbled on Thursday as trade tensions dampened the demand outlook, with the crude benchmarks posting their biggest daily falls in six months.
U.S. crude was at $58.7 a barrel, up 1.4%, after Thursday's 5.7% fall that took it to the lowest in two months. Brent crude futures rebounded 1.3% to $68.65 per barrel, after falling 4.6% in the previous session.
Additional reporting by Tomo Uetake and Noah Sin, editing by John Stonestreet