* Stocks, commodities rebound from Monday's sharp losses
* Japanese yen falls against dollar, euro
* VDAX-New volatility index eases
By Dominic Lau
LONDON, Aug 18 (Reuters) - World stocks and commodity prices
recovered on Tuesday from the previous session's sell-off, which
was prompted by concerns over the pace of global recovery, while
the Japanese yen and safe-haven U.S. government bonds eased.
U.S. stocks suffered their worst loss in seven weeks on
Monday while Chinese shares saw their biggest daily percentage
drop in nine months.
The Shanghai Composite Index <> ended 1.4 percent
higher on Tuesday, reversing earlier losses after dipping to a
two-month low in intraday trade. Japan's Nikkei average <>
also closed up.
The drop in China's market had a domino effect on other
markets, fuelling worries among some analysts that rallying
assets prices have run too far ahead of economic fundamentals
and weak earnings prospects.
"Many of us hope that the Chinese market will not (be) ...
starting a long travel underwater with the rest of the world as
its passengers," broker Close Brothers Seydler said in a note.
"However, the weak performance of the Shanghai Composite
Index in the last days indicates that a correction of an
overheated market could be imminent."
The pan-European FTSEurofirst 300 <> index, which
tumbled 45 percent last year, has rallied nearly 44 percent from
its March floor and is up more than 11 percent this year.
The index rose 0.7 percent on Tuesday, partly aided by
expectations that German ZEW investor sentiment figures, due at
0900 GMT, would be positive.
The think tank's monthly survey will rise to 45.0 from 39.5
in July, according to the mid-range forecast in a Reuters poll
of 40 analysts.
Nokia's <NOK1V.HE> Chief Executive Olli-Pekka Kallasvuo said
on Tuesday he expected a slow, gradual recovery in the world
economy.
The MSCI world equity index <.MIWD00000PUS> advanced 0.3
percent after losing nearly 3 percent on Monday -- its biggest
one-day percentage loss in four months.
Crude prices <CLc1> rose above $67 a barrel and copper
prices <MCU3> gained 1 percent as investors regained a bit of
risk appetite.
VOLATILITY EASES
The VDAX-NEW volatility index <.V1XI>, a gauge of investor
risk aversion in Europe, fell 1.9 percent, after soaring 14
percent to hit its highest close in five weeks on Monday.
The higher the volatility index, the lower is investors'
appetite for risky assets such as equities.
The yen retreated from its highest levels this month against
the dollar and euro and losing ground against commodity-link
currencies.
"Gains in yen crosses today were a recovery from excessive
losses the previous day, rather than investors being actively
engaged in risk trading," said Ayako Sera, a market strategist
at Sumitomo Trust & Banking.
The dollar gained 0.7 percent to 95.10 yen, but lost ground
against the euro, trading at $1.4121.
Yields on benchmark 10-year U.S. Treasuries <US10YT=RR> were
up 3 basis points at 3.506 percent, while the 10-year euro zone
<EU10YT=RR> Bund yield was unchanged at 3.302 percent.
(Additional reporting by Christoph Steitz in Frankfurt and
Kaori Kaneko in Tokyo)
