(Updates prices)
* MSCI World index hits 3-week high, but Chinese stocks dip
* Brexit hopes, strong data lift pound to 2-month high
* Dollar down at 7-week low, Treasury yields edge up
* Norwegian crown falls as central bank trims rate forecasts
* World FX rates in 2018 http://tmsnrt.rs/2egbfVh
By Danilo Masoni
MILAN, Sept 20 (Reuters) - A bounce in world stocks on relief that fresh U.S. and Chinese tariffs on reciprocal imports were less harsh than feared continued on Thursday, although investors remained wary about the next steps in the US-Sino trade war.
An MSCI index tracking shares in 47 countries .MIWD00000PUS rose 0.3 percent to a three-week high, supported by gains in Europe and Asia, but Chinese equities dipped after a two-day rally due to bets of government stimulus to limit the economic damage of new trade barriers.
The pan-European STOXX .STOXX benchmark rose 0.5 percent, while Japan's Nikkei .N225 ended little changed, barely moving after a well-anticipated win by Japanese Prime Minister Shinzo Abe in a ruling party leadership vote. Street futures pointed to slight gains at the open.
Markets were also watching a European Union summit where leaders lined up to tell UK Prime Minister Theresa May she needed to give guarantees on the Irish border before they will agree the deal she wants to avoid Britain crashing out of the bloc. a knee-jerk negative reaction to the new tariffs announced by Washington and Beijing on Tuesday, markets have been speculating that an immediate escalation could be averted.
U.S. President Donald Trump has not made fresh threats to extend tariffs to all Chinese imports.
"Making forecasts on Trump is always a risk but it's a fact that at the moment the escalation has taken a break," said Anthilia Capital fund manager and strategist Giuseppe Sersale.
For his part, Chinese Premier Li Keqiang said this week he would not would not weaken the yuan to boost exports.
Broader market sentiment was at odds with a new Reuters poll that showed unanimous agreement that an escalating trade war with China was bad economic policy for the United States and could slow economic growth.
Rob Carnell, chief economist and head of research, Asia-Pacific at ING, said he saw more reasons to take a "glass-is-half-full" approach, given the recent emerging market selloff.
The consensus of the poll for U.S. growth showed a slowdown to 2.0 percent in the final quarter of 2019, less than half the last reported rate of 4.2 percent. S&P 500 E-mini futures ESc1 rose 0.1 percent following strong gains on Wall Street on Wednesday.
The rally in global stocks has been accompanied a drop in demand for safe-haven assets, boosting U.S. Treasuries yields and sending the dollar to seven-week lows. The Japanese yen has also been under pressure.
The yield on benchmark 10-year Treasury notes US10YT=RR edged up to 3.0775 on Thursday but remained below the highest level since May 18 it reached on Wednesday.
This move comes ahead of what is expected to be a hawkish meeting of the U.S. Federal Reserve next week. 113 economists in the Reuters poll forecast the Fed would hike rates when it meets Sept. 25-26. It is expected to follow that up with one more before the end of this year, taking the fed funds rate to 2.25-2.50 percent. dollar index .DXY , which tracks the dollar against a basket of six major rivals, dipped 0.38 percent at 94.184, a fresh seven week low.
The dollar was 0.05 percent lower against the yen at 112.20 JPY= , while the euro EUR= rose 0.44 percent against the greenback at $1.1724.
POUND CELEBRATES
The pound rose 0.77 percent to $1.3245 GBP=D3 versus the dollar, making fresh two-month highs, helped by growing confidence that a Brexit trade deal can be clinched in the coming months.
Forecast-beating British retail sales data also supported the sterling. was in a celebratory mood," said Connor Campbell, analyst at Spreadex.
On Thursday a French official said London and Brussels should make as much progress as possible towards a Brexit deal by October. Earlier UK Cabinet Office minister David Lidington said Britain was over 85 percent of the way to agreeing a deal with the EU.
The Norwegian crown slumped versus the euro after the country's central bank raised interest rates for the first time in seven years, as expected, but trimmed its policy rate forecasts. The crown fell 0.7 percent versus the euro to 9.584 EURNOK=D3 . commodities, oil prices steadied but the market remained bullish after news of another fall in U.S. crude inventories and on signs that OPEC may not raise production enough to compensate for the loss of Iranian exports hit by sanctions. Brent crude LCOc1 dipped 0.1 percent at $79.37. O/R
On metal markets, copper CMCU3 ended two days of gains, falling 0.6 percent at $6,080 a tonne, as concerns resurfaced about the health of the global economy and higher U.S. interest rates ahead of a central bank meeting. MET/L