* MSCI world equity falls for third straight day
* European shares bounce on ECB inflation revamp report
* U.S.-China trade war takes toll on earnings (Updates with open of U.S. markets, changes dateline; previous LONDON)
By Chuck Mikolajczak
NEW YORK, July 18 (Reuters) - A gauge of global shares declined for a third straight session on Thursday on worries over how the trade war between the United States and China could dent corporate earnings, while oil prices dropped on expectations of rising output.
On Wall Street, shares of Netflix plunged 11.40% in the wake of its quarterly results as it missed targets for new subscribers overseas.
Honeywell, up 1.99%, helped curb losses as its results topped expectations and it raised its full-year outlook. However, the diversified manufacturer said it is planning "somewhat cautiously" for the second half due to the volatile geopolitical and economic movements.
"Netflix did nothing to soothe investor concerns around what earnings prospects are likely to unfold over the next couple of weeks," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
Still, earnings are now expected to show growth of 0.6% for the second quarter, according to Refinitiv data. S&P 500 companies were expected to show a decline as recently as Tuesday.
Officials of the U.S. and China were scheduled to hold a telephone call later on Thursday on trade, U.S. Treasury Secretary Steven Mnuchin told CNBC.
The Dow Jones Industrial Average fell 106.75 points, or 0.39%, to 27,113.1, the S&P 500 lost 6.53 points, or 0.22%, to 2,977.89 and the Nasdaq Composite dropped 38.66 points, or 0.47%, to 8,146.54.
In Europe, stocks were initially weaker as disappointing earnings from software firm SAP pulled down its shares as much as 10%, dragging the technology sector with it, as it flagged the impact of the U.S.-China trade war.
But the Euro STOXX 600 managed to erase some of its earlier losses in the wake of a Bloomberg News report that European Central Bank staff are studying a potential revamp of the bank's near 2% inflation goal, which could prolong its stimulus program more than currently expected.
The pan-European STOXX 600 index lost 0.19% and MSCI's gauge of stocks across the globe shed 0.31%.
In commodities, oil slumped more than 2% on an expectation that crude output would rise in the Gulf of Mexico following last week's hurricane in the region.
U.S. Treasury yields moved higher after economic data on manufacturing in the mid-Atlantic region rebounded, while weekly jobless claims showed the country's labor market remains strong.
Despite a flurry of strengthening economic data recently, market participants consider it a certainty the Federal Reserve will cut rates by at least a quarter of a percentage point at its July 30-31 meeting.
Benchmark 10-year notes were unchanged in price to yield 2.0606%, from 2.061% late on Wednesday.
In currencies, the dollar slipped slightly in the wake of the data while sterling rose, in part after a vote by lawmakers to make it harder for Britain's next prime minister to try to force a no-deal Brexit.
The dollar index fell 0.07%, with the euro was unchanged at $1.1223. Sterling was last trading at $1.2487, up 0.45% on the day.
Additional reporting by Medha Singh and Uday Sampath in Bengaluru; editing by Bernadette Baum