* MSCI all world index ease 0.1 percent
* European share markets continue selloff
* Confusion over timing of trade truce, China's commitments
* U.S. yield curve inversion raises recession concerns
* Dollar weakens, sterling bounces (Updates with European open, comment)
By Karin Strohecker
London, Dec 4 (Reuters) - Deflating hopes of a swift resolution to the Sino-U.S. trade war knocked world stocks off a three-week high on Tuesday, while recession warning lights in U.S. bond markets weighed on the dollar.
Optimism over a rapprochement between U.S. President Donald Trump and China's Xi Jinping at the weekend G20 meeting was replaced by scepticism and left Wall Street braced for another day in the red.
Adding to market jitters was an inversion of the short end of the U.S. yield curve in bond markets, which historically has signalled a U.S. recession.
Asian markets had seen Japan's Nikkei close 2.4 percent lower after a jump in yen. Europe fared a little better, but London Frankfurt DAX and Paris were all 0.4 to 0.6 percent lower.
"The initial relief rally was never going to last. Investors need more detail now in order for that risk-on sentiment to survive," said Jasper Lawler, head of research at London Capital Group. "So far that detail has not been coming through, and investors have more questions than answers."
There was added confusion over when the 90-day period, during which the U.S. and China would hold off on imposing more tariffs, would start.
A White House official had said it started on Dec. 1, while earlier, White House economic adviser Larry Kudlow told reporters it would start on Jan. 1.
Moreover, none of the commitments that U.S. officials said had been given by China - including reducing its 40 percent tariffs on autos - were agreed to in writing and specifics had yet to be hammered out.
Meanwhile, the U.S. yield curve focussed investors' minds. The curve between U.S. three-year and five-year and between two-year and five-year debt inverted on Monday - the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.
Analysts expect the two-year, 10-year yield curve - seen as a predictor of a U.S. recession - to follow suit.
On Tuesday, the yield on benchmark 10-year Treasury notes was at 2.95 percent compared with its U.S. Monday close of 2.99 percent. And the spread between 10-year and two-year Treasury yields tightened to around 13 basis points - hitting its narrowest level since July 2007. "The focus is now shifting to the inverted U.S. bond yield curve, which has negative connotations, while implying the U.S. economy is heading towards what was only a few weeks ago an improbable economic slowdown," said Stephen Innes, head of trading for APAC at Oanda.
"Now, even recessionary fear is starting to raise its ugly head."
However, analysts also said U.S. manufacturing data released on Monday had been reassuringly strong, with new orders a "key driver" in boosting activity.
Oil prices also extended gains, adding another 2 percent to Monday's 4 percent surge, as investors bet a key OPEC meeting on Thursday would deliver supply cuts.
Benchmark Brent crude oil jumped by $1.89 to a high of $63.58 before easing back to trade around $63 by 1240 GMT. U.S. light crude was up $1 at $53.95 after earlier gaining more than 3 percent to an intraday high of $54.55.
Another major shift was the dollar weakening against the other major world currencies again.
The dollar index, which tracks the greenback against a basket of peers, softened 0.5 percent to 96.53, while the euro added 0.6 percent to $1.1416.
Sterling climbed as well after the European Court of Justice's advocate general said Britain had the right to unilaterally withdraw its notice that it is leaving the European Union.
The advocate general's advice is non-binding, but the prospect of a route out of the Brexit process cheered the market, even as Prime Minister Theresa May pressed ahead with plans for a parliamentary debate on her proposed divorce deal.
It saw the pound rise as high of $1.28 versus the broadly weaker dollar. Against the euro, it rose 0.4 percent to a day's high of 88.9 pence.
"The parliamentary debate should reiterate the divisions between and within the political parties, pointing to a low likelihood of the Brexit deal being voted through in Parliament next week," said Petr Krpata, an currency strategist at ING.
The dollar also weakened 0.8 percent against the Japanese yen and fell more than 0.5 percent against the offshore Chinese yuan to 6.83 yuan, its weakest level since September.
Federal Reserve Chairman Jerome Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee, but the hearing was postponed because of a national day of mourning for U.S. President George H.W. Bush, who died on Friday.
The dollar originally came under pressure last week on Powell's comments that rates were nearing neutral levels, which markets interpreted as signalling a slowdown in the Fed's rate-hike cycle.
In pre-market Wall Street trading, Apple shares were down almost 2 percent after leading the rally on Monday. One of the company's suppliers, Cirrus Logic, trimmed its revenue outlook, more evidence that the latest iPhones are not selling well.
Among the precious metals, spot gold rose as dollar weakened, trading up 0.5 percent at $1,237.24 per ounce. Palladium gained another 2 percent to notch its latest all-time high.
Reporting by Karin Strohecker; additional reporting by Andrew Galbraith; editing by Andrew Heavens, Larry King