* 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 Marc Jones
LONDON, March 6 (Reuters) - Share markets in Asia and Europeregained ground on Tuesday after U.S. President Donald Trumpfaced growing pressure from political allies to pull back fromproposed steel and aluminium tariffs and a potential globaltrade war.
European sentiment was also supported after Germany reformedits coalition government to end more than five months inpolitical limbo and as initial unease caused by a hefty electionvote for anti-establishment parties in Italy began to ebb.
Italian bonds gained IT10YT=TWEB and shares bounced almost1 percent .FTMIB having slipped to a six-month low after theweekend vote.
Europe's big three - Britain's FTSE .FTSE , Germany's Dax .GDAXI and France's Cac .FCHI - were up 0.5-1 percent too,with euro EUR= a fraction higher and the pound GBP= a touchweaker as the dollar steadied. /FRX
"Over and above the noise about (U.S.) protectionism we aregetting now, we would we would need to see real evidence it isdamaging growth and that is going to take some time," said headof global macro strategy at State Street Global Markets, MichaelMetcalfe.
"...We have been here before in 2002 and 2003 with steeltariffs and that wasn't devastating."
Top U.S. Republican politicians, including House speakerPaul Ryan, urged Trump on Monday not to go ahead with tariffs onforeign imports of steel and aluminium.
Even though the president said he would not back down, hesuggested Canada and Mexico could be exempted if a new NAFTAtrade deal was agreed. There was speculation that this had beenthe main motivation behind the plan.
After Wall Street's S&P 500 had put on more than 1 percent,Asia's bourses rallied in concert overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.5 percent, snapping five straight days oflosses. Japan's Nikkei .N225 jumped 1.8 percent from afive-month low, helped too by reassurances from the head of theBank of Japan that it would not suddenly end stimulus. .T
Korean shares .MIKR00000PUS also erased the remainder ofthe hit they took after Trump's tariff warnings last week. Thecountry is seen as being among the most exposed in Asia due tothe large amount of steel it exports to the United States.
"Even in the face of such bad news, it shows the volume ofmoney in the equity market that is looking for an entry point,"said JP Morgan Asset Management's chief markets strategist forthe UK and Europe, Karen Ward.
RATE EXPECTATIONS
The threat of a trade war is not the only source of tensionfor the world's financial markets.
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 upand lead to fast interest rate hikes.
The European Central Bank meets this week and looks almostcertain later this year to end its three-year-old, 2.5 trillioneuro ($3.08 trillion) stimulus programme.
U.S. 10-year bond yields had reared back up to 2.8888percent on Monday and most euro zone yields - with theexception of those in Italy - were following suit with GermanBunds off a five-week low at 0.65 percent DE10YT=RR .
"The ECB is going to be presenting growth forecasts that arelikely to be stronger, but will be at pains to stress that themove away from monetary easing will be delicately done," saidPeter Chatwell, head of euro rates strategy at Mizuho.
The euro EUR= traded at $1.2340, having extend itsrecovery from a seven-week low of $1.2154.
In Italy, where currency traders are keeping an eye onpost-election developments as none of the three main factionshas emerged with enough seats to govern alone, the country'sPresident, Sergio Mattarella, is expected to open formalcoalition talks in April.
Early elections are possible if no coalition accord isfound.
The Canadian dollar CAD=D3 was stuck near an eight monthlow at C$1.2995. FRX/
Canada is most exposed U.S. tariff threats but its centralbank holds a rate meeting on Wednesday and if it keeps the dooropen to further hikes, the currency "is likely to be able toresist further notable depreciation," Commerzbank (DE:CBKG) said.
In commodities, crude prices held firm, underpinned byrobust demand forecasts and prospects for informal contactssought by OPEC with U.S. shale oil producers at an industrymeeting in Houston this week.
U.S. West Texas Intermediate crude futures CLc1 traded at$62.69 per barrel, up 0.2 percent following a 2.2 percent gainon Monday. Bellwether industrial metal copper CMCU3 gained 1percent in its biggest jump in almost a month. MET/L
China's government said on Monday it was confident aboutkeeping its growth rate at around 6.5 percent this year and onTuesday defended a move to hike military spending by the biggestamount in three years. = 0.8105 euros)
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