GLOBAL MARKETS-Wall St caps Trump-induced stocks selloff; dollar ticks up

(Recasts with U.S. markets, changes comment, dateline from previous LONDON)

* World stocks index falls further after worst day in six months

* Brazilian benchmark stock index tumbles

* Dollar steadies; Treasury yields little changed

By Rodrigo Campos

NEW YORK, May 18 (Reuters) - Stocks rose on Wall Street on Thursday, capping a wave of declines in major world equity markets triggered by uncertainty over U.S. President Donald Trump's agenda, with the U.S. dollar also recovering slightly after five days of losses.

Reports that Trump had tried to intervene in an investigation into alleged Russian meddling in last year's U.S. presidential election, and that his aides had numerous undisclosed contacts with Russian officials, kept market tensions high a day after the S&P 500 posted its largest drop since September.

The Justice Department on Wednesday named former FBI chief Robert Mueller as special counsel to investigate alleged Russian interference in the 2016 U.S. election and possible collusion between Trump's campaign and Moscow.

Adding to market jitters across the Americas, Brazilian stocks triggered a 30-minute circuit breaker after the benchmark Bovespa index fell 10 percent following a report President Michel Temer gave his blessing to an attempt to pay to silence a potential witness in the country's biggest-ever graft probe.

The iShares MSCI Brazil ETF tumbled 15.6 percent in 6.5 times the average volume over the past 10 trading days.

U.S.-traded shares of mining giant Vale (Swiss: VALE.SW - news) and Brazilian state-controlled oil company Petrobras tumbled 6.4 percent and 15.3 percent respectively.

The Brazilian real weakened about 7.3 percent against the U.S. dollar.

On Wall Street, stocks recovered mildly after a near 2 percent selloff on Wednesday on the S&P 500. The string of news headlines from the White House, however, kept traders on edge.

"I'm interested to se if we can continue to keep the momentum throughout the day. It has paid to be a buyer in every sharp down move we've had over the last five years," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

He warned, however, about joining the buying spree.

"The first part of this could be people covering shorts from yesterday," he said. "Because there is a little more political intrigue, (the rebound) may be hard to sustain."

The allegations surrounding Trump have not only thrown doubt over the future of the pro-economic growth policies he promised in the campaign, but have raised the possibility he could end up leaving the White House prematurely.

Trump, barely four months into his four-year term, said a special counsel's probe would show there was "no collusion" between his campaign and a foreign power.

The Dow Jones Industrial Average rose 21.16 points, or 0.1 percent, to 20,628.09, the S&P 500 gained 4.9 points, or 0.21 percent, to 2,361.93 and the Nasdaq Composite added 29.25 points, or 0.49 percent, to 6,040.49.

The pan-European FTSEurofirst 300 index lost 0.51 percent and MSCI (Frankfurt: 3HM.F - news) 's gauge of stocks across the globe shed 0.36 percent.

Emerging market stocks lost 1.87 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.88 percent lower, while Japan's Nikkei lost 1.32 percent.

Treasury yields were barely changed after a sharp drop on Wednesday. The benchmark yield near its 2017 low hit in April was an indication that the selling in stocks may not be over.

The stock market could have "a little bit more trouble holding (because) bonds are basically unchanged and gold is falling but not much," Kinahan said.

Benchmark 10-year notes last fell 1/32 in price to yield 2.2173 percent, from 2.216 percent late on Wednesday.

Spot gold dropped 0.5 percent to $1,254.10 an ounce. U.S. gold futures fell 0.36 percent to $1,254.20 an ounce.

DATA GIVES DOLLAR SUPPORT

The U.S. dollar reversed early losses against a basket of major currencies after new applications for U.S. jobless benefits unexpectedly fell last week and factory activity in the mid-Atlantic (Shanghai: 600558.SS - news) region accelerated sharply.

"The U.S. economy is offering a welcome distraction to the negative news flows out of Washington," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

"The readings on jobless claims and the Philly Fed index back expectations for faster (second quarter) growth and a Fed rate hike next month."

The dollar index rose 0.02 percent, with the euro down 0.29 percent to $1.1126.

The Japanese yen weakened 0.08 percent versus the greenback at 110.90 per dollar, while Sterling was last trading at $1.3005, up 0.28 percent on the day.

In commodities markets, U.S. crude rose 0.49 percent to $49.31 per barrel and Brent was last at $52.43, up 0.42 percent on the day.

Copper lost 0.52 percent to $5,581.00 a tonne.

(Reporting by Rodrigo Campos, additional reporting by Karen Brettell and Dion Rabouin) )