GLOBAL MARKETS-Stocks rebound from selloff after Trump tones down Greenland rhetoric

By Chibuike Oguh and Amanda Cooper

NEW YORK/LONDON, Jan 21 (Reuters) - Global shares rebounded from a prior session selloff on Wednesday after President Donald Trump toned down his rhetoric in his threats to acquire Greenland while speaking in Davos.

Trump called for immediate negotiations toward a deal to acquire Greenland, but added he would not use force in his campaign for the northern island. That was a softer tone from the U.S. president, who had said there was "no going back" on his goal to control the island, and had refused to rule out taking it by force. He had also threatened tariffs on Europe, rekindling fears of a global trade war.

On Wall Street, the Dow Jones Industrial Average .DJI rose 0.68%, the S&P 500 .SPX gained 0.52% and the Nasdaq Composite .IXIC added 0.35%.

Fears of foreign selling of U.S. assets - the so-called "Sell America" trade that emerged after last year's "Liberation Day" tariff announcements in April - had gripped markets, causing Wall Street's main indexes to notch their biggest daily loss since October 10 in the previous session.

"The market bounced when he said we wouldn't use force," said Mark Hackett, chief market strategist at Nationwide in Boston. "Following the events of last April, investors are catching on that his negotiating style is very different than past administrations, so uncertainty is a natural outcome."

MSCI's All-World index .MIWD00000PUS was up 0.22% after losing ground in the last session, while Europe's STOXX 600 index .STOXX, finished a touch lower by 0.02%. The U.K.'s FTSE index .FTSE added 0.11%.

"It wasn’t so much what president said that mattered as what he didn’t say," said Brian Jacobsen, chief market strategist at Annex Wealth Management in Wisconsin. "He didn’t reiterate his tariff threat against Europe. He didn’t say the government would use force to get Greenland."

The VIX index .VIX, which measures demand for protection against big swings in the S&P 500, dropped more than 8% to 18.43, a day after jumping to its highest since November. The index is often used as a proxy for investor nervousness and for many, 20 is the point above which market volatility can suddenly explode.

"You had the Venezuelan thing, you had Greenland and you had Iran and none of these things seemed to be making a huge dent," said James St. Aubin, chief investment officer at Ocean Park Asset Management in Santa Monica, California.

"Obviously we had a pretty significant selloff yesterday but in the grand scheme of things, it seems the market should have a hard time making new highs and yet it continues to brush off some of these very provocative ideas that Trump likes to throw around."

The European Parliament decided to suspend its work on a trade deal between the 27-member bloc and the U.S., a parliament member said, following Trump's repeated requests to take control over Greenland. The European Union will convene an emergency summit in Brussels on Thursday to discuss the matter, with the long-standing U.S.-EU alliance at risk.

BONDS ATTEMPT RECOVERY

The global bond market was still reeling from a brutal selloff, having been caught up in a perfect storm of worries over exposure to U.S. assets and a surge in Japanese government borrowing costs.

At the epicentre were long-dated Japanese sovereign bonds, which endured their most aggressive selloff in nearly 25 years on Tuesday, as fears grew over increased government spending under Japanese Prime Minister Sanae Takaichi.

U.S. 30-year Treasury yields US30YT=RR neared the 5% threshold for the first time since September, while German government bond yields also rose sharply DE30YT=RR.

By Wednesday, Japanese bond prices rallied as buyers returned, almost entirely reversing the previous day's rise in yields. A similar dynamic played out across U.S. Treasuries, where 30-year bond yields fell 2.6 basis points to 4.8951%. The yield on benchmark U.S. 10-year notes US10YT=RR eased 2.4 basis points to 4.271%.

In currency markets, the dollar index =USD, which tracks the U.S. currency's performance against that of six others, rebounded from earlier losses and was up 0.17%. The euro EUR= pared earlier gains and was down 0.26% to $1.169725, while the Swiss franc CHF= fell, leaving the dollar up 0.49% at 0.79365 francs.

The yen JPY=EBS was slightly weaker against the dollar at 158.215 per dollar ahead of a Bank of Japan policy meeting on Friday. No rate hike is expected this time, though policymakers could signal an increase may be coming as soon as April.

Oil prices edged higher as optimism around tighter supply after a temporary shutdown at two large fields in Kazakhstan was offset by expectations of a build in U.S. crude inventories. Brent crude futures LCOc1 was up 0.59% at $65.29 a barrel.

Spot gold XAU= was up 1.89% to $4,848.69 per ounce.