* Wall Street bounces back after selloff
* Oil up after big slide, but market still shaky
* European shares and bonds firm; focus on Italy and European Commission
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
By April Joyner
NEW YORK, Nov 21 (Reuters) - World stock markets and oil prices climbed on Wednesday, with earnings and gains in tech stocks lifting shares on Wall Street, while the euro rose on hopes Italy and the European Commission would reach a compromise on a dispute over Italy's 2019 budget draft.
The recovery in U.S. tech and other momentum stocks boosted the benchmark S&P 500 stock index .SPX after it fell 3.5 percent over the previous two sessions. Strong earnings from Foot Locker (NYSE:FL) Inc FL.N and Gap Inc (NYSE:GPS) GPS.N boosted consumer discretionary stocks. The small-cap Russell 2000 .RUT index rallied nearly 2 percent. European STOXX 600 index .STOXX also rose 1.1 percent as beaten-down stocks in the tech and banking sectors recovered.
Wednesday's stock market activity showed signs of investors recovering their risk appetite, albeit in thin volume in U.S. markets going into Thursday's Thanksgiving holiday, said Robert Phipps, director at Per Stirling Capital Management in Austin, Texas.
"There's outperformance in tech stock and small caps. That's normally viewed as a risk-on move," Phipps said. "But volume equals validity, and I don't expect to get lots of volume."
U.S. stock and bond markets will be closed on Thursday and open for a half-day on Friday.
MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.78 percent.
The Dow Jones Industrial Average .DJI rose 159.93 points, or 0.65 percent, to 24,625.57, the S&P 500 .SPX gained 25.65 points, or 0.97 percent, to 2,667.54 and the Nasdaq Composite .IXIC added 101.08 points, or 1.46 percent, to 7,009.91.
EURO GAINS
Also reflecting positive investor sentiment, the euro rose on hopes that the Italian budget dispute would be resolved even as the European Commission took its first step toward disciplining Italy over its deficit. dollar index .DXY , which tracks the greenback against a basket of six major currencies, slipped 0.2 percent after having advanced in Tuesday's risk-off session.
Italian bonds rallied, pushing two-year yields down as much as 20 basis points. prices climbed after U.S. government data showed strong demand for gasoline and diesel, though gains were limited by concern over rising crude supply. U.S. crude prices had sunk to one-year lows after Tuesday's selloff. crude CLcv1 surged 4.25 percent to $55.70 per barrel. Brent crude LCOc1 futures rose to $64.02 a barrel, a 2.4 percent gain.
Benchmark 10-year notes US10YT=RR last fell 10/32 in price to yield 3.0846 percent, from 3.048 percent late on Tuesday.
Despite the improved sentiment, market participants have been preparing for a loss of momentum in global growth as China takes a hit from Washington's trade tariffs and the United States comes off the high of President Donald Trump's tax cuts. David, a strategist at UBS Global Wealth Management, said a G20 meeting between Trump and Chinese President Xi Jinping at the end of the month could determine the course of bond markets and euro/dollar rates.
"If we don't get a relaxation of trade tensions after the G20, markets may start questioning the prospect of another Fed rate hike in December," he said.
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https://tmsnrt.rs/2PDCn30 Brent crude oil curve falls into contango png
https://tmsnrt.rs/2R1kFDa Italy's 10-year bond yield tumbles
https://tmsnrt.rs/2QV3WRL
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