By Dion Rabouin
NEW YORK (Reuters) - U.S. stocks reversed early losses on Wednesday but fears of instability in the European Union and prolonged global stagnation sent bourses in most parts of the globe lower as Britain's pound sank below $1.30 for the first time in more than three decades.
Wall Street turned upward to show modest gains after the release of positive U.S. economic data and a turn higher in oil prices.
The Dow Jones industrial average rose 32.56 points, or 0.18 percent, to 17,873.18, the S&P 500 gained 5.85 points, or 0.28 percent, to 2,094.4 and the Nasdaq Composite added 28.30 points, or 0.59 percent, to 4,851.20.
U.S. Treasury yields also rose after Institute for Supply Management (ISM) data showed growth in the U.S. service sector increased in June at the fastest pace in seven months.
The report showed that "even though the (Federal Reserve) is almost certainly going to be on hold for a sustained period due to the Brexit thing, the U.S. economy continues to do relatively well," said Luke Bartholomew, an investment manager at Aberdeen Asset Management in London.
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Longer-dated Treasury yields earlier hit record lows, with 10-year U.S. Treasury yields and 30-year yields falling to all-time lows of 1.321 percent and 2.098 percent respectively.
The rise in U.S. stocks countered losses in Europe, emerging markets and most of Asia, which all fell more than 1 percent, as international investors favored safe-haven plays over riskier assets like stocks.
MSCI's all-world stock index fell 0.55 percent.
Traditional safe havens largely held gains with gold rising to a more than two-year high and the yen soaring to a 3-1/2-year high against the British pound, and to two-week peaks versus the dollar and euro.
Henderson Global, Columbia Threadneedle and UK Canada Life on Wednesday became the latest British commercial property funds to suspend trading, joining three others worth about 10 billion pounds, in the first sign of markets seizing up since Britain's vote to exit the EU.
That was a warning sign for investors, Aberdeen's Bartholomew said.
"Investors are continuing to digest the implications of Brexit and while, yes, monetary policy remains easy there are still these other shocks, which the U.S. is largely insulated from but they still affect risk sentiment," he said.
Money markets are pricing in a good chance of a cut in one or more of the Bank of England's official interest rates to zero within the next three months. Sterling fell as low as $1.2798 in Asian trading before recovering to $1.2886.
China, which has been steadily weakening the yuan while eyes are fixed on Europe, allowed its currency to fall to another 5-1/2-year low against the dollar overnight.
The easing has helped China's bourses remain in positive territory with the Shanghai Composite Index adding 0.4 percent for a fourth straight day of gains and the blue-chip CSI300 index rising 0.3 percent, its eighth straight rise.
Oil prices rose after a two-day decline lured buyers back. Brent crude futures were up 0.75 percent to $48.31 a barrel. U.S. crude futures rose 0.95 percent to $47.06.
(Reporting by Dion Rabouin; Additional reporting by Patrick Graham in London; Editing by James Dalgleish)