* Trump pauses planned Iran attack, says 'good chance' of

nuclear deal

* European stocks rally, US futures flat

* Bond selloff abates as oil prices ease

(Updates for European morning session)

By Rae Wee and Harry Robertson

SINGAPORE/LONDON, May 19 (Reuters) - Global stock and

bond markets steadied on Tuesday after U.S. President Donald

Trump paused a planned attack on Iran and said there was a good

chance of a nuclear deal, sending oil prices lower.

Trump said on Monday he had halted a planned resumption of

attacks against Iran to allow time for negotiations to take

place on a deal to end the war, after Tehran sent a new peace

proposal to Washington.

He subsequently said there was a "very good chance" the U.S.

could reach an agreement with Iran to prevent Tehran from

obtaining a nuclear weapon.

Investors remained cautious, after being rattled in the

previous session by a weekend drone strike in the United Arab

Emirates.

European stocks rose 0.7% in early trading, further

recovering ground lost on Friday when they dropped 1.5% as bond

market jitters spread to equities.

Futures for the U.S. S&P 500 were little changed

after the index flatlined on Monday following a 1.2% drop on

Friday.

"We've seen a lot of back and forth already," said Fabien

Yip, a market analyst at IG.

"Until we actually see real action happening (in the Strait

of Hormuz), whereby ships are passing through safely and we see

a material rebound in the numbers of traffic going through in

the Strait, I think the market in general is shrugging off the

commentary from either side."

Brent crude futures fell 1.4% to $110.50 a barrel on

the back of Trump's comments, while U.S. crude was flat

at $108.70 per barrel. Both remained more than 50% above their

pre-war levels.

MSCI's broadest index of Asia-Pacific shares outside Japan

was down more than 1%, while Japan's Nikkei

eased 0.4%.

The all-important artificial intelligence trade will be

tested by earnings from chipmaker Nvidia ( NVDA ) that are due

on Wednesday, with expectations sky-high for the world's most

valuable company.

"Nvidia ( NVDA ) is the market's shorthand for everything AI and this

market's gains have been driven in large part by AI over the

past few years," said Richard Reyle, chief investment officer at

Questar Capital Partners.

BOND SELLOFF ABATES

The fall in oil prices helped stem a steep selloff in global

bonds on Tuesday, although worries remain about any lasting

inflationary shock from the Iran war.

Yields on the benchmark 10-year U.S. Treasury note

eased from a more than one-year high above 4.63% to

4.597%.

Japanese and European government bond yields - which have

also shot higher over the last week - also fell, with British

yields dropping the most. Yields move inversely to prices.

Overnight, G7 finance ministers acknowledged mounting

concerns over public debt and bond market volatility as they met

in Paris.

Markets are now pricing in rate hikes from major central

banks this year on expectations policymakers will have to

tighten policy to combat a resurgence in inflation driven by

higher-for-longer energy prices.

"Markets are still trading the same uncomfortable balance,"

said Florian Ielpo, head of macro at Lombard Odier Investment

Managers.

"The micro story remains strong, with AI still acting as the

main support for US equities, but the macro story is becoming

less forgiving," he said, referencing rising oil prices and bond

yields.

In foreign exchange, the dollar has benefited from

safe-haven demand since the onset of the war and was up 0.1% at

159.04 yen, putting traders on alert for any intervention

from Tokyo to shore up its ailing currency.

The euro was down 0.2% at $1.16. Sterling

similarly fell 0.2% to $1.34.