The United States is proposing new talks with China aimed at getting bilateral economic negotiations back on track, according to two people familiar with the matter.
MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 0.22 percent.
Energy shares rose in Europe and the United States after U.S. crude inventories dropped and the bite of sanctions on Iran threatened to limit supply.
U.S. crude settled up 1.62 percent at $70.37 per barrel while Brent gained 0.86 percent to $79.74.
The Dow Jones Industrial Average rose 27.86 points, or 0.11 percent, to 25,998.92, the S&P 500 gained 1.03 points, or 0.04 percent, to 2,888.92, and the Nasdaq Composite dropped 18.25 points, or 0.23 percent, to 7,954.23. [.N]
The market's mood music had been somber after a weak trading session in Asia, with bourses in Shanghai, Hong Kong and Tokyo all closing lower.
President Donald Trump said on Tuesday the United States was taking a tough stance on trade issues with China. That cemented expectations that new levies on Chinese exports would soon be announced.
"What the market needs is a signal of some relaxation in trade rhetoric, a bit of climbdown," said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers. "That should be enough as (economic) fundamentals are strong. But you do need a trigger point, and so far we have not seen it."
MSCI's broad emerging markets index <.MSCIEF> touched a near-16-month low before staging a recovery after the Wall Street Journal initially reported that the United States was proposing new trade talks with China, to rise 0.12 percent.
The Chinese yuan traded offshore also gained against the dollar. U.S.-listed exchange-traded funds focused on China traded higher, pointing to a strong open for Asian markets on Thursday.
Hard-hit emerging markets currencies <.MIEM00000CUS> were 0.43 percent stronger, helped by a weaker greenback. The U.S. dollar index <.DXY> fell 0.43 percent as hopes also grew of concessions by Canada that would resolve disputes over reworking the North American Free Trade Agreement.
Ahmed said another positive catalyst for markets could be signals from the U.S. Federal Reserve that it could slow the pace of interest rate rises. But given the torrent of strong U.S. data, that looks unlikely - data this week showed U.S. small business optimism at the highest level on record.
"In 2015 when emerging markets got into a lot of trouble the Fed recognized the international spillover effect. This time that has not happened," he added.
Markets will also keep an eye on U.S. bonds, especially given the steady march higher in shorter-term Treasuries heavily influenced by expectations of Fed policy. The yield on the 2-year note <US2YT=RR> hit a decade peak of 2.7522 percent despite weaker-than expected producer price data.
Political risk, meanwhile, returned to the radar of investors in Italy. Italian bond yields, which fell to six-week lows in recent days, rose after local media reported that 5-Star, one of the parties in the ruling coalition, was demanding 10 billion euros in the budget to implement plans for a basic universal income.
(Reporting by Trevor Hunnicutt; Additional reporting by Sujata Rao and Karin Strohecker in London, Shinichi Saoshiro in Tokyo, and Divya Chowdhury in Mumbai; Editing by Andrea Ricci and Leslie Adler)
By Trevor Hunnicutt