By David Randall NEW YORK (Reuters) - Hopes for a resolution in a prolonged trade spat between the United States and China helped extend a week-long rally in world stock markets on Wednesday, and bond yields also climbed. European shares rose 0.6 percent following broad gains in Asia. MSCI's gauge of stocks across the globe gained 0.44 percent. Bond yields climbed as investors sold safe-haven government bonds in favor of riskier assets like equities. Benchmark 10-year notes last fell 7/32 in price to yield 2.7075 percent, from 2.684 percent late on Tuesday. U.S. President Donald Trump said on Tuesday he could let a March 1 deadline for a trade deal with China "slide" if the two sides were not close on agreement. But he added he was "not inclined" to delay raising tariffs. "There's still a level of uncertainty there but at least the rhetoric does not show he is digging his heels in, so the market has quite rightly taken it as a positive," said Justin Onuekwusi, fund manager at Legal & General Investment Management. On Wall Street, the Dow Jones Industrial Average rose 117.51 points, or 0.46 percent, to 25,543.27, the S&P 500 gained 8.3 points, or 0.30 percent, to 2,753.03 and the Nasdaq Composite added 5.76 points, or 0.08 percent, to 7,420.38. The rise in U.S. benchmark Treasury yields came after data showed core consumer prices rose in January. The core Consumer Price Index, excluding food and energy components, gained 0.2 percent, rising by the same margin for a fifth month. "The Fed's new reaction function is they need to see inflationary pressures before they hike again, and clearly we've seen those inflationary pressures aren't there," said Mohammed Kazmi, portfolio manager at UBP in Geneva. China's blue-chip CSI 300 rose around 2 percent to a four-month high, with tech shares leading gains. Progress on another issue unnerving markets - a deal to fund the U.S. government and avoid another possible government shutdown - also provided a boost to risk appetite. The Cboe Volatility Index, Wall Street's so-called "fear gauge," dropped overnight to 14.95, its lowest since October. Emerging market stocks faltered, trading flat on the day. Bank of America Merrill Lynch said on Tuesday investors saw emerging markets as the "most crowded" trade for the first time ever. In commodities, oil prices surged nearly 2 percent after OPEC said it slashed production in January and as U.S. sanctions hit Venezuela's oil exports. (Reporting by David Randall; Editing by Bernadette Baum, Susan Thomas and Sonya Hepinstall)