(Updates moves, adds context)

By Stefano Rebaudo and Linda Pasquini

June 11 (Reuters) - Euro zone government bond yields

reversed course to trade lower on Wednesday after a

cooler-than-expected consumer inflation report out of the United

States encouraged traders to bet on a bigger chance of more rate

cuts this year.

Eyes were also on any details of the outcome of U.S.-China

trade talks after President Donald Trump said a deal was struck

for Beijing to supply magnets and rare earth minerals in

exchange for access to U.S. colleges and universities for

Chinese students.

The two countries had agreed, after two days of talks in

London, to get a delicate trade truce back on track.

Germany's 10-year yield, the euro area's

benchmark, was marginally lower at 2.53% from 2.55% before the

data, while German 2-year yields fell 2 basis points

to 1.839%.

Negotiated wage growth across the 20-nation euro zone is

seen at 3.1% this year, the ECB's monthly wage tracker showed.

The ECB has long argued that wage growth around 3% would be

consistent with its 2% inflation target.

Money markets fully priced in a European Central Bank rate

cut of 25 bps by December and an around 60%

chance of an identical move in September.

The ECB's latest rate cut will help inflation bounce back to

its 2% goal after an expected sag over the next year and a half,

the ECB's chief economist Philip Lane said on Wednesday.

Danske Bank has removed a July cut from its forecast,

assuming a final 25-bps cut in September to 1.75%, with risks

tilted towards one additional cut in the fourth quarter.

It stated that the euro area economy was expanding, but was

edging close to stagnation, while the ECB was nearing success in

its efforts to combat inflation.

U.S. consumer prices increased marginally in May, landing

below expectations due to cheaper gasoline. But inflation is

expected to accelerate in the coming months on the back of the

Trump administration's import tariffs.

Italian 10-year yields were down 2 bps at

3.434%, leaving the gap between German and Italian yields

at 88.8 bps. The spread hit 86.70 bps on Tuesday,

its lowest level since February 2021.

"We had already exited our Italy vs Bund trade, but are

keeping our Italy vs France trade, as the view also reflects our

concerns over France's deficit and the political picture," said

Mohit Kumar, chief economist Europe at Jefferies.

Meanwhile, Britain's borrowing costs also eased from higher

levels following a multi-year spending review which underlined

the country's fiscal challenges just as pressure mounts to boost

the economy.

Britain's 10-year gilt was up 0.5 bps at 4.548%,

down from its session high at 4.62%.