* Washington says open to trade talks
* STOXX 600 up 0.7%; MSCI world equity index up 0.2%
* Yuan slips despite support from state banks
* Gold at six-year highs
* German 10-year bond yield falls to record lows
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Wilson
LONDON, Aug 7 (Reuters) - A cautious calm returned to stock markets on Wednesday as softer rhetoric from Washington on the U.S.-China trade war soothed investors, though demand for safe-haven assets underscored lingering anxiety.
Europe's STOXX 600 .STOXX climbed 0.7%, recovering from a three-day sell-off as investors fled after an escalation in the trade war. MSCI's world equity index .MIWD00000PUS , which tracks shares in 47 countries, rose 0.2%.
But gold, the Japanese yen and government debt remained in high demand as investors remained wary of riskier assets.
U.S. shares gained overnight after President Donald Trump downplayed worries of a lengthy trade war and senior adviser Larry Kudlow said Trump's administration is planning to host a Chinese delegation for talks in September Wall Street futures gauges also rose.
The U.S. administration's remarks marked a shift in tone from recent days, when Beijing warned that Washington's labelling China as a currency manipulator on Monday would have severe consequences for the global financial order.
Still, market players voiced caution. Trump's threat to impose additional tariffs on more Chinese products is set to take effect in less than a month.
"There is some cautious buying creeping back in," said Michael Hewson, chief market strategist at CMC Markets. "But if you want that to be sustained you have to look towards September 1, when the new tariffs kick in, and whether or not Trump presses ahead with them."
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was slightly lower.
Also easing the mood were signs that China is intervening to steady the yuan after its recent sharp fall, allaying investor fears of a global currency war.
The U.S. Treasury designated China a currency manipulator on Monday, after it allowed the yuan to weaken below 7 per dollar for the first time in over a decade. The U.S. move rattled financial markets and dimmed hopes the trade war was ending.
Since then, China's state banks have been active in the onshore yuan forwards market, tightening dollar supply and supporting the Chinese currency, sources told Reuters. yuan still dropped 0.2% to 7.0708 in offshore markets CNH=EBS despite the support. The People's Bank of China (PBOC) set its official reference rate at an 11-year low, keeping currency markets on edge had a little bit of recovery yesterday, but this morning we are seeing that stalling due to the PBOC fixing the dollar-yen higher again," said Thu Lan Nguyen, FX strategist at Commerzbank (DE:CBKG). "It has caused markets to again be in a bit of a risk-off mode."
SAFE HAVENS IN DEMAND
The skittish mood was underlined by continuing demand for currencies and commodities considered safe havens.
Gold reached a six-year high of $1,489.76 per ounce XAU= . The Japanese yen rose 0.2% to 106.27 JPY=EBS , although that was still some way from levels seen on Monday when the trade war's escalation panicked investors.
U.S. bonds have also retained much of their gains made in the past week. Ten-year Treasury notes yielded 1.66% percent US10YT=RR , their lowest since 2016, as investors bet on another rate cut by the Federal Reserve in September.
Fixed income markets have benefited from fears the U.S-China trade war would raise the risk of a global recession, strengthening the case for policy easing by central banks.
Germany's 10-year bond yield fell to record lows deep in negative territory as a bigger-than-expected interest rate cut in New Zealand and weak German data gave further impetus to a rally in bond markets. industrial output fell more than expected in June, adding to signs that Europe's biggest economy contracted in the second quarter as its exporters were caught up in trade disputes. commodity markets, oil prices slipped, with the potential for damage to the global economy and to fuel demand from the Sino-U.S. trade dispute casting a shadow over the market.
International benchmark Brent crude futures LCOc1 were at $58.79 a barrel by 0759 GMT, down 14 cents, or 0.05%, and trading near seven-month lows.
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