* Global shares snap four-day losing streak on Monday
* Trade war fears ease after backlash against Trump's plan
* Euro shrugs off inconclusive Italian election
* European shares seen rising 0.5-0.8 pct
By Hideyuki Sano
TOKYO, March 6 (Reuters) - Asian shares regained ground onTuesday after U.S. President Donald Trump faced growing pressurefrom political allies to pull back from proposed steel andaluminium tariffs, easing investor worries about an imminenttrade war.
Sentiment was also supported by receding risk aversion inEurope with the euro gaining support from the creation of acoalition government in Germany and the impact of Italy'sinconclusive election results limited to a mild sell-off indomestic bonds and stocks.
European shares are expected to gain, with financialspreadbetters tipping Britain's FTSE .FTSE and France's Cac .FCHI to rise 0.5 percent and Germany's Dax .GDAXI 0.8percent.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.5 percent, snapping five straight days oflosses, while Japan's Nikkei .N225 jumped 1.8 percent from afive-month low.
Korean shares .MIKR00000PUS have erased all the lossesthey had taken after Trump's announcement even though thecountry is seen as being among the worst affected in region bythe tariffs due to its big steel exports to the United States.
U.S. S&P500 .SPX have also now recouped all the lossesincurred after Trump's tariff plan.
Leading Republicans, including House of RepresentativesSpeaker Paul Ryan and Representative Kevin Brady, turned up thepressure on Trump to rethink the plan on Monday. the opposition from Republican lawmakers and tradingpartners, there is speculation that Trump may not be able toforce through the plan," said Soichiro Monji, chief strategistat Daiwa SB Investments.
Some investors also saw the tariffs threats as a U.S.negotiating tactic to get a better deal on NAFTA.
Still, uncertainty remains with confusion about the timingand extent of the planned tariffs inside the White House. Trumpsaid on Monday he would not back down.
Trump was expected to finalise the planned tariffs later inthe week, although some observers familiar with the process saidit could occur next week.
The spectre of a trade war was not the only source ofconcern for the stock market.
As the global economy steams ahead, investors have becomeincreasingly concerned that U.S. inflation, which has beensubdued since the 2008 financial crisis, could finally pick up.
While moderate inflation generally supports equityinvestors, rapid inflation, or fear of it, could prompt theFederal Reserve to hike rates faster, undermining the attractionof equities.
"Given the importance of bond yields to equity valuation,equity investors are affected by potential changes in bondyields just as much as fixed-income investors," said ColinMoore, Global Chief Investment Officer at Boston-based ColumbiaThreadneedle Investments.
"In the current environment, although inflation appears tobe increasing, it's still not likely to cause 10-year yields torise to levels that would be problematic for equities. Iestimate that problematic level to be a 4 percent yield."
U.S. bond yields rose as Wall Street shares rallied. The10-year U.S. Treasuries yield US10YT=RR rose back to 2.888percent from last week's low of 2.793 percent. A break of lastmonth's peak of 2.957 percent could trigger fresh selling inTreasuries, traders say.
In the currency market, the euro EUR= traded at $1.2343,extending its recovery from a seven-week low of $1.21545 hit onThursday.
The euro managed to recover losses made on Monday after twoanti-establishment leaders made early plays to govern Italyfollowing an inconclusive election where voters shuntedmainstream parties to the sidelines. none of the three main factions had enough seats togovern alone, President Sergio Mattarella is expected to openformal coalition talks in April, with early elections possibleif no accord is found.
"With any coalition that can be formed likely to have aright of centre bias, this ought to be bad for the euro but theGerman election result appears to have counterbalanced anydetrimental effects. We are holding to our pre-election stancethat this is not the time to be adding Italian risk," said PaulHatfield, Global Co-Chief Investment Officer at Alcentra, partof BNY Mellon Investment Management.
The dollar fetched 106.41 yen JPY= , up 0.2 percent for theday, crawling back from its 16-month low of 105.24 touched onFriday on improved risk appetite.
The Canadian dollar CAD=D3 hit an eight-month low ofC$1.3002 per U.S. dollar as U.S. President Donald Trump usedproposed tariffs on steel and aluminium as a bargaining chip intalks to revamp NAFTA.
The Australian dollar was almost flat at $0.7773 AUD=D3 after the Reserve bank of Australia kept its policy on hold asexpected.
Crude prices held firm, underpinned by robust demandforecasts and prospects for informal contacts sought by OPECwith U.S. shale oil producers at a key industry meeting inHouston this week.
U.S. West Texas Intermediate crude futures CLc1 traded at$62.69 per barrel, up 0.2 percent on Tuesday following 2.2percent gain on Monday.
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