(Updates prices, changes comments, dateline from previousLONDON)
* U.S. data drags crude prices lower
* U.S. stocks off their lows; Europe edges up
* Steel stocks rally on Wall Street
By Rodrigo Campos
NEW YORK, March 7 (Reuters) - A key gauge of world stockmarkets slipped on Wednesday after a strong advocate of freetrade resigned from the White House, fanning fears that U.S.President Donald Trump will proceed with protectionist tariffsand risk a global trade war.
But the U.S. dollar recovered most of its overnight lossesas some investors wagered that even with the departure ofTrump's chief economic adviser Gary Cohn, the president's hardtalk could still be a tactic amid ongoing trade negotiationswith Canada and Mexico.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed0.52 percent, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.33 percent.
Cohn had resigned on Tuesday, but he and the president hadbeen discussing his possible departure for weeks, a White Houseofficial said. the eyes of the market, (Cohn) was viewed as the adultin the room on many items," said Gene Tannuzzo, senior portfoliomanager at Columbia Threadneedle Investments in Minneapolis.
"This should create a greater risk premium in the currencymarkets for countries that depend heavily on the U.S. for trade.Not surprisingly, the Canadian dollar and Mexican peso are muchweaker this morning."
Against the greenback, the Mexican peso lost 0.36 percent to18.81 and the Canadian dollar fell 0.90 percent to 1.30 perdollar.
However, the overall outlook for the U.S. currency is notupbeat. Goldman Sachs (NYSE:GS) analysts said in a Wednesday note thattariffs similar to those proposed by Trump have usually beenassociated with subsequent currency weakness.
"We therefore see the latest news as an additional reason toremain cautious on the outlook for the broad Dollar," accordingto Goldman's note.
The dollar index .DXY , tracking it against a basket ofmajor currencies, rose 0.1 percent, with the euro EUR= down0.06 percent to $1.2395.
The Japanese yen strengthened 0.18 percent versus thegreenback at 105.96 per dollar, while sterling GBP= was lasttrading at $1.3887, up 0.01 percent on the day.
OIL, GOLD DROP
Steel sector stocks rose sharply on Wall Street, but notenough to keep the major U.S. indexes afloat on lingeringconcern that a protracted trade war would weaken the U.S. andglobal economies.
The losses, however, were smaller than what futures hadindicated overnight in an initial reaction to Cohn's exit.
“I suspect that it's still a fluid situation," said JasonWare, chief investment officer at Albion Financial in Utah.
He said with Trump keeping a close eye on stock indexes, theselling that is preceded by tariff and trade war talks couldchange the president's mind.
"Indeed, here is a president who judges his success by usingthe stock market as an important barometer for that. So if themarket votes an overwhelming vote of no confidence on thesetariffs, is there a chance that things change next week? Couldbe."
The Dow Jones Industrial Average .DJI fell 276.91 points,or 1.11 percent, to 24,607.21, the S&P 500 .SPX lost 19.67points, or 0.72 percent, to 2,708.45 and the Nasdaq Composite .IXIC dropped 34.90 points, or 0.47 percent, to 7,337.10.
Equities got a bid after White House trade adviser PeterNavarro, who favors strong tariffs, said in a Bloomberginterview he was not a candidate to replace Cohn.
"The market's gone up on that," said Joe Saluzzi, co-managerof trading at Themis Trading in Chatham, New Jersey.
"The market sees him (Navarro) as a very protectionist type.If he's not in the running, the market seems to like that."
European car makers .SXAP , were up 0.6 percent after earlier dropping more than 1 percent on the risk of a hike inimport tariffs to the United States.
Emerging market stocks lost 0.64 percent. MSCI's broadestindex of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.74 percent lower, while Japan's Nikkei .N225 lost0.77 percent.
Oil prices fell after U.S. government data showed anincrease in inventories, with Washington's plans for importtariffs weighing further on investor sentiment.
U.S. crude CLc1 fell 2.41 percent to $61.09 per barrel andBrent LCOc1 was last at $64.32, down 2.23 percent on the day.
Benchmark 10-year notes US10YT=RR last rose 5/32 in priceto yield 2.8607 percent, from 2.877 percent late on Tuesday.
The 30-year bond US30YT=RR last rose 1/32 in price toyield 3.1349 percent, from 3.136 percent late on Tuesday.
Spot gold XAU= dropped 0.7 percent to $1,324.47 an ounce.U.S. gold futures GCcv1 fell 0.74 percent to $1,325.30 anounce.
Copper CMCU3 lost 0.99 percent to $6,934.50 a tonne.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Global assets in 2018
http://tmsnrt.rs/2jvdmXlGlobal currencies vs. dollar
http://tmsnrt.rs/2egbfVhGlobal bonds dashboard (DO NOT USE UNTIL UPDATE FOUND)
http://tmsnrt.rs/2fPTds0Emerging markets in 2018
http://tmsnrt.rs/2ihRugVMSCI All Country Wolrd Index Market Cap
http://tmsnrt.rs/2EmTD6j
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