(Refiles to fix typos in second paragraph.)
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
* European shares open lower; Asian shares gain
* Japanese yen up 0.5%
* Oil gains
By Ritvik Carvalho
LONDON, Aug 27 (Reuters) - World shares gained on Tuesday as some investors held out hopes for a trade deal between the United States and China, even though they continued to raise tariffs on each other last week.
Shares in Asia followed U.S. stocks higher on Monday, after U.S. President Donald Trump predicted a trade deal with China. European shares recovered to trade higher after opening lower.
Automakers and Italian stocks boosted the pan-European STOXX index, which was up 0.3% by midday in London.
Germany's DAX rose 0.4% and France's CAC 40 gained 0.2%. Italy's FTSE MIB rose over 1% on hopes the country's ruling 5-Star Movement and the opposition Democratic Party would make a deal to form a new Italian government.
MSCI'S All Country World Index, which tracks shares across 47 countries, was up 0.16% on the day.
Wall Street futures last traded flat.
Trump said on Monday that Chinese officials had contacted their U.S. trade counterparts and offered to resume negotiations, an assertion that China declined to confirm. The comments helped temper losses in global markets after both sides announced new tariffs on Friday. "Some of the moves we have seen in the summer are exaggerated because of investors being away," said Ugo Lancioni, managing director of global fixed income and currency management at Neuberger Berman.
"Though we are lightly positioned on risk in our portfolios given the `deal or no deal' situation, whether it is the trade war, Brexit or Italy, we are wary of a snap-back rally in the markets."
Lancioni added that investors have been looking for safe assets such as gold, the Japanese yen and the Swiss franc in recent months, so some of those assets may be overvalued.
The Japanese yen, which rallies when markets turn risk averse, was up 0.3% to the dollar.
Gold, another safe haven, was 0.3% higher at $1,529.86 per ounce and just off its gains the day before, which reached its highest in more than six years.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.35% after dropping 1.3% the previous day. Japan's Nikkei rose 1%.
The Shanghai Composite Index rallied 1.35%, with a boost from data showing China's industrial companies returned to profit in July.
South Korea's KOSPI added 0.4%.
Markets have been quick to rally on any encouraging signs from trade negotiations between the U.S. and China. However, tariffs have only escalated between the two countries since 2018, creating uncertainty and curbing growth.
"Although the continued resilience of consumers keeps us confident in the global economic outlook, we do not see this as the best environment for taking risk on stocks," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
"As a result, we make three changes to our tactical asset allocation. We remove our overweight to global equities versus high grade bonds and initiate an underweight to emerging market stocks versus high grade bonds. Separately, we also adjust our overweight to select higher yielding emerging market currencies."
The dollar index versus a basket of six major currencies stood at 97.91, falling 0.2%. The euro was 0.1% higher at $1.1109 after losing 0.4% on Monday.
Oil prices rose. Brent crude futures were up 1.14% at $59.38 per barrel after losing 1% the previous day. U.S. crude rose 1.32% to $54.35 per barrel. (Reporting by Ritvik Carvalho; additional reporting by Saikat Chatterjee in London; editing by Larry King)