* MSCI World down 0.1 pct from 5-1/2-month high
* Canada rejoins NAFTA talks in Washington
* Turkish lira slides further, bank bonds sell off
* Global earnings growth still being revised up: reut.rs/2LAe0Mw
* Global assets performance in 2018: reut.rs/2LAbPsC
By Helen Reid
LONDON, Aug 29 (Reuters) - Global stocks eased on Wednesday on uncertainty over Canada’s position in NAFTA, and with investors also nervous ahead of a deadline for the next round of China-U.S. tariffs next week.
Talks to renew a NAFTA trade agreement between the United States, Mexico and Canada - after Monday’s U.S.-Mexico deal - hinge on Canada. Uncertainty over when a final agreement might pass the U.S. Congress also kept trade muted.
MSCI’s world equity index, which tracks shares in 47 countries, eased 0.1 percent from the 5-1/2-month high hit after Mexico and the United States struck their deal.
“The market is quite right to say after the knee-jerk reaction higher in the Mexican peso and equities, a) there was remarkably little detail, and b) what is the state of Canada?” Aberdeen Standard Investments head of global strategy Andrew Milligan said.
“It helps this rebound in risk assets we’re seeing but it is an erratic rally because we need a bit more fuel to the fire,” he said.
U.S. stocks were set for a cautious open with eMini futures for the S&P 500 giving back gains to trade flat while Dow Jones futures fell 0.1 percent.
European stocks drifted either side of flat, with the index of top 50 companies down 0.02 percent by 1247 GMT.
U.S. President Donald Trump threatened to proceed with Mexico alone and levy tariffs on Canada if it does not come on board with revised trade terms. But a trade deal might struggle to win approval from Congress unless Canada comes on board.
“The final decisions are unlikely until 2019 at the earliest,” Goldman Sachs analysts wrote in a note to clients, saying that control of the majority in Congress might have gone to the Democrats by then, which could make agreement more difficult.
Currencies reflected investors’ lingering uncertainty.
Against the U.S. dollar, the Canadian dollar fell 0.1 percent while Mexico’s peso declined 0.3 percent.
European autos stocks also slid 0.3 percent as details of the agreement on autos emerged.
Auto executives and sources told Reuters a side agreement would allow the U.S. to slap punitive tariffs of up to 25 percent on imports of Mexican-made cars, sport utility vehicles and auto parts above certain volumes.
On another front of the global trade conflicts, a deadline for public comment on Trump’s increased tariffs on $200 billion of Chinese goods was less than a week away on Sept. 5.
“End-of-month flows could start to take hold into the end of the week, and combined with light news flow and the risk of impending trade war escalation could result in conviction remaining light,” JPMorgan analysts wrote in a note.
The White House has said it wants to settle NAFTA before negotiating with China, suggesting trade disputes will run well into 2019.
“There’s a big debate taking place among investors: is Trump hoping to reach agreement with all the big players to demonstrate what a successful negotiator he is, or is he trying to make sure he’s got agreement with NAFTA and the EU and therefore can turn all the firepower on to China?” Milligan said.
Major currencies quietened down after a turbulent few days, with the dollar index 0.2 percent firmer at 94.887 after touching a four-week low overnight.
The euro eased to $1.1661 after hitting a one-month high at $1.1733 overnight. The currency’s gains are being capped by concerns over Italy’s budget.
“We believe that Italy is headed on a collision course with the EU as the two meet to discuss Italy’s budget in September,” Man Group portfolio managers wrote in a note.
But peripheral euro zone bond markets recovered slightly.
Italy’s 10-year and 2-year bond yields fell on media reports that Italy may ask the European Central Bank for new bond purchasing.
Emerging market stocks came under renewed pressure, falling 0.2 percent as the dollar rose.
Turkey’s lira extended losses, down 3.2 percent to 6.45 to the dollar, a two-week low, concern grew about the effects of the country’s currency crisis, and Finance Minister Berat Albayrak was quoted as saying he did not see a risk to the economy.
Dollar-denominated Turkish bank bonds also fell after Moody’s sounded the alarm over the sector.
Overall, emerging markets have clawed back from this month’s sharp sell-off.
“On balance people are looking to buy EM assets but it would be foolish to say buy them all because there are still vulnerabilities in a sizeable number,” Aberdeen Standard’s Milligan said.
In commodity markets, spot gold rose 0.2 percent to $1,203.34 an ounce.
Oil prices extended gains on news of a fall in Iranian crude supplies as U.S. sanctions deter buyers.
Brent gained 0.6 percent to $76.38 a barrel. U.S. crude climbed 0.7 percent to $69.00.
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Reporting by Helen Reid Additional reporting by Wayne Cole Editing by Andrew Bolton