GLOBAL MARKETS-Stocks rise as recession, trade worries ebb; sterling tumbles

By April Joyner

* Sterling slides as UK PM plans to cut parliamentary time

* Oil prices rise as data show U.S. inventory drawdowns

* Treasury yield curve inversion deepens

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Updates to close of U.S. markets)

By April Joyner

NEW YORK, Aug 28 (Reuters) - A gauge of equities worldwide rose on Wednesday as data showing strong demand for oil helped subdue recession jitters, while sterling tumbled as Britain's prime minister moved to suspend parliament before the country's planned departure from the European Union.

The MSCI All-Country World Index rose 0.31% as U.S. stocks advanced, though the pan-European STOXX 600 ended 0.2% lower. Safe-haven assets such as gold and the Japanese yen fell, though not far from recent highs.

Data showing a drop in U.S. crude stockpiles lifted oil prices. The sign of healthy demand quelled to some extent the fears of a severe economic downturn prompted by the inversion of the U.S. Treasury yield curve, which has historically been a highly accurate predictor of a U.S. recession.

U.S. crude settled 1.55% higher to $55.78 per barrel and Brent settled at $60.49, up 1.65% on the day.

Along with the oil inventory data, a respite from negative developments in U.S.-China trade relations helped equities advance, several market watchers said. Earlier, stocks had been pressured by concerns about the possibility of economic disruption from a no-deal Brexit.

"People initially were worried about what was happening within the UK," said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance in Charlotte, North Carolina. "But we've gotten a little bit of a relief rally on positive fundamentals in the U.S. as people are not worried so much about what happens with trade."

Worries over Brexit, however, led to a sharp decline in the British pound. Sterling was last down 0.59% against the dollar at $1.2214 after Prime Minister Boris Johnson set Oct. 14 as the date for the formal state opening of a new session of parliament. The opening limits the time the parliament would sit before the planned date for Brexit on Oct. 31.

On Wall Street, the Dow Jones Industrial Average rose 258.2 points, or 1%, to 26,036.1, the S&P 500 gained 18.78 points, or 0.65%, to 2,887.94 and the Nasdaq Composite added 29.94 points, or 0.38%, to 7,856.88.

Demand for Treasuries remained robust during a $41 billion auction of five-year government debt on Wednesday. Yields on 30-year U.S. Treasuries touched all-time lows earlier in the session and were below those of 3-month bills . The 30-year yield also fell below the S&P 500 dividend yield for the first time since March 2009. The yield curve between 2-year and 10-year notes remained inverted.

Benchmark 10-year Treasury notes last rose 6/32 in price to yield 1.4693%, from 1.49% late on Tuesday.

"It's become very difficult for investors to garner an idea of where we go to next," said Michael Hewson, chief market strategist at CMC Markets. "The weakness in bond yields and the strength in havens speaks to an investor that is becoming increasingly risk-averse."

In currencies, the dollar index rose 0.25%. The Japanese yen weakened 0.40% versus the greenback at 106.18 per dollar but remained close to its 2-1/2-year high of 104.44 hit on Monday.

Among commodities, spot gold dropped 0.21% to $1,539.10 an ounce, though not far off its six-year peak touched on Monday.

Spot silver added 1.04% to $18.35 an ounce after having hit $18.50, its highest level since April 2017.

(Reporting by April Joyner; Additional reporting by Richard Leong, Kate Duguid, Chuck Mikolajczak and Laila Kearney in New York and Tom Wilson in London; Editing by Steve Orlofsky and Lisa Shumaker)