* World stocks hit fresh 7-week high
* MSCI ex-Japan near 2 month highs, Chinese shares jump
* Trump says to help ZTE “get back into business, fast”
* Malaysian ringgit hits 4-month low after election shock
* Oil eases from multi-year highs, dollar dips
By Kit Rees
LONDON, May 14 (Reuters) - Prospects of a thaw in U.S.-China trade tensions supported global stocks on Monday, as U.S. President Donald Trump pledged to help ZTE Corp “get back into business, fast” after a U.S. ban crippled the Chinese technology company, while oil prices retreated from highs.
Trump’s comments on Sunday came ahead of a second round of trade talks between U.S. and Chinese officials this week to resolve an escalating trade dispute. China had said last week its stance in the negotiations would not change.
The MSCI world equity index, which tracks shares in 47 countries, was up 0.1 percent, holding at its highest level in seven weeks and in positive territory for the year. European stocks were broadly flat as energy stocks and financials weighed.
“There have been some very serious issues raised in terms of the trade relationship between the U.S. and China, and then they’ve had this quite sudden about-turn on this particular company, and it simply raises questions as to what the underlying policy is,” Alastair George, chief strategist at Edison Investment Research, said.
“This is perhaps a little reminder which is being relatively well-received by markets over the last 24 hours that (with) the U.S. administration there is a strong degree of unpredictability compared to prior regimes,” Edison’s George added.
The United States has said it will lift sanctions on Pyongyang if North Korea agrees to completely dismantle its nuclear weapons program.
Stocks in Asia were also upbeat. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, while Japan’s Nikkei also tacked on 0.5 percent.
Chinese shares came off the day’s highs but were still higher after Trump’s comments on ZTE Corp, , which JPMorgan analysts said was “a significant positive.”
Shanghai’s SSE Composite index rose 0.3 percent while the blue-chip rallied 0.9 percent. Hong Kong’s Hang Seng index climbed 1.4 percent.
Elsewhere in Asia, the Malaysian ringgit recovered losses after sliding 1 percent to a four-month trough against the dollar in the first onshore trade since a shock election upset last week. Malaysian stocks sank as much as 2.7 percent at one point but were last up 1.5 percent.
Veteran Mahathir Mohamad came out of political retirement to lead the opposition Pakatan Harapan (Alliance of Hope) to a stunning victory defeating prime minister Najib Razak, a former protege he had accused of corruption.
Some investors were concerned that populist promises such as repealing an unpopular goods and services tax and restoring a petrol subsidy could undermine the country’s finances.
But some analysts believe Mahathir’s proposals could be positive for the economy.
“The repeal of GST, while only marginally negative for the fiscal deficit, will be a boon for consumers, who have been upset that they bear the burden of poor fiscal management and came out to vote against the establishment,” said Trinh Nguyen, senior economist at Natixis. OIL AND IRAN While tensions in the Korean peninsula have eased, U.S. plans to reintroduce sanctions against Iran have stoked anxiety in the Middle East.
Iran pumps about 4 percent of the world’s oil, and the latest development has sent oil prices near multi-year highs.
Citi analyst Mark Schofield said rising oil prices risk causing ‘stagflation’, which could create a particularly “hostile environment” for risk assets.
On Monday, U.S. crude slipped to $70.33 a barrel and Brent was down at $76.70 as a relentless rise in U.S. drilling activity pointed to increased output.
The United States threatened on Sunday to impose sanctions on European companies that do business with Iran, as the remaining participants in the Iran nuclear accord stiffened their resolve to keep that agreement operational.
In currencies, the dollar dipped 0.2 percent to 92.40 against a basket of major currencies and was set for its fourth straight day of losses.
Against the Japanese yen, it ticked down to 109.52 per dollar, remaining largely in a holding pattern since late last month.
The euro rose 0.3 percent to $1.1974 following two consecutive sessions of gains as Italy’s anti-establishment parties looked likely to form the next government.
Last week, the Bank of England held rates steady and New Zealand’s central bank said the official cash rate will remain at historic lows of 1.75 percent for “some time.”
That leaves the Fed as the only major central bank in the world committed to rate increases although recent data showing moderate inflation reading has cast doubt over the pace of any hikes.
The U.S. 10-year Treasury yield was slightly higher at 2.9805 percent.
Spot gold was up 0.2 percent at $1,320.01 an ounce, after eking out a small weekly gain last week.
Reporting by Kit Rees, Additional reporting by Swati Pandey in Sydney Editing by Richard Balmforth