GLOBAL MARKETS-Stocks climb, dollar dips as US-China talks in focus

By Chuck Mikolajczak

NEW YORK, June 9 (Reuters) - Global stocks climbed on Monday while the dollar retreated as talks began in London between the United States and China, aimed at cooling a trade dispute between the world's two largest economies.

The trade dispute has expanded beyond tit-for-tat tariffs to restrictions over rare earths, threatening to cripple supply chains and slow global growth.

"I think it'll be a watered-down deal, but it'll be a deal, and that would alleviate some of the fear factors over tariffs," said Peter Cardillo, chief market economist at Spartan Capital Securities.

On Wall Street, all three major indexes were higher, with the Dow erasing earlier declines caused by weakness in Travelers TRV.N and McDonald's MCD.N, the latter of which was downgraded by Morgan Stanley to an "equal-weight" rating.

The Dow Jones Industrial Average .DJI rose 99.41 points, or 0.23%, to 42,862.26, the S&P 500 .SPX rose 18.48 points, or 0.31%, to 6,018.84 and the Nasdaq Composite .IXIC rose 88.71 points, or 0.46%, to 19,618.93.

MSCI's gauge of stocks across the globe .MIWD00000PUS advanced 3.37 points, or 0.38%, to 895.33 and was on track for its second straight session of gains. It has risen in five of the last six sessions.

In Europe, the pan-European STOXX 600 .STOXX index closed down 0.07% to snap a four-session winning streak, its longest run of consecutive gains in three weeks.

The U.S. dollar slipped against most major currencies, as optimism over a better-than-expected U.S. employment report on Friday was offset by caution ahead of the trade talks.

U.S. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer will represent Washington in the talks with China, President Donald Trump said in a social media post.

China's foreign ministry said Vice Premier He Lifeng will be in Britain for the first meeting of the China-U.S. economic and trade consultation mechanism.

U.S. economic data showed wholesale inventories increased in April amid stockpiling of prescription medication in anticipation of tariffs from the Trump administration.

Investors are also awaiting U.S. inflation data on Wednesday that may adjust expectations for the timing of any rate cuts by the Federal Reserve.

Analysts at Morgan Stanley said they see May as the starting point for a string of increasingly strong core inflation prints, with the push from tariffs peaking in the third quarter and beginning to fade in the fourth quarter.

The market is currently pricing in a 59% chance for a cut of at least 25 basis points at the central bank's September meeting, according to LSEG data. Fed officials are in a blackout period ahead of the June 18 policy decision.

The dollar index =USD, which measures the greenback against a basket of currencies, lost 0.14% to 98.97, with the euro EUR= up 0.24% at $1.1421.

Longer-dated U.S. Treasury yields were lower at the start of the week, reversing after Friday's jobs report pushed yields higher. The yield on benchmark U.S. 10-year notes US10YT=RR declined 3.4 basis points to 4.476%.

U.S. crude CLc1 rose 0.51% to $64.92 a barrel and Brent LCOc1 rose to $66.74 per barrel, up 0.41% on the day on hopes a trade deal could spur the global economic outlook.