NEW YORK (Reuters) - World stock markets inched higher on Tuesday, propelled by solid gains on Wall Street, after China’s central bank stepped in to stabilize the yuan, soothing fears that a protracted trade spat between the United States and China would spill over into a currency war.

Global markets had suffered a rout on Monday after China let the yuan fall below the 7 to the dollar level for the first time in more than a decade, spurring the United States to label Beijing a currency manipulator.

On Tuesday safe-haven assets, including bonds, gold and currencies like the yen and Swiss franc, dipped as investors moved tentatively back into the euro, sterling and some emerging-market currencies. Yet investor sentiment remained fragile.

“I think the tipping point for a more prolonged negative trend (for risk assets) is quite close,” said Hans Peterson, SEB Investment Management’s head of asset allocation.

On Wall Street, the Dow Jones Industrial Average .DJI rose 311.78 points, or 1.21%, to 26,029.52, the S&P 500 .SPX gained 37.03 points, or 1.30%, to 2,881.77 and the Nasdaq Composite .IXIC added 107.23 points, or 1.39%, to 7,833.27.

The pan-European STOXX 600 index .STOXX lost 0.47% and MSCI's broad gauge of stocks across the globe .MIWD00000PUS gained 0.50%.

U.S. President Donald Trump and Treasury Secretary Steven Mnuchin said on Monday China was manipulating its currency, and that Washington would engage the International Monetary Fund to clamp down on Beijing.

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“Officially labeling China a currency manipulator gives the United States a legitimate reason to take even more steps,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “The markets are now scrambling to factor in the possibility of the United States imposing not only an additional 10% of tariffs on Chinese imports, but the figure being raised to 25%.”

Goldman Sachs said it no longer expects a trade deal to be struck before the November 2020 U.S. presidential election. Morgan Stanley said more tit-for-tat tariffs could tip the world economy into recession by the middle of next year.

Though U.S. Treasury yields edged back up to 1.74% from October 2016 lows of 1.672%, German yields stayed down at minus 0.54%. Markets are now pricing in a 100% chance the European Central Bank will cut its already negative interest rates again next month.

China's offshore yuan stretched the previous day's slide, briefly weakening to 7.1382 CNH=D4, the lowest level since international trading in the Chinese currency began in 2010. But it pulled back to 7.0469 after Beijing's firmer-than-expected fixing on Tuesday.

The Japanese yen touched a seven-month high of 105.520 per dollar JPY= before dropping back as far as 106.700 in volatile trade.

Oil prices slipped near seven-month lows as the trade tensions between the United States and China intensified worries about slowing global demand. Brent crude oil futures LCOc1 fell 1.3% to $59.06 per barrel, while U.S. crude dipped 1.7% to $53.74.

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Spot gold XAU= stalled after advancing to a six-year peak of $1,474.80 an ounce.

Graphic: Global assets in 2019 - tmsnrt.rs/2jvdmXl

Graphic: Global currencies versus dollar - tmsnrt.rs/2egbfVh

Graphic: Emerging markets in 2019 - tmsnrt.rs/2ihRugV

Graphic: MSCI All Country World Index Market Cap - tmsnrt.rs/2EmTD6j