* Chinese state media lambastes Trump, markets nervous
* European shares trim losses on earnings hopes
* Dollar rallies, FX mkts fret about tariff escalation
* Oil gains after unexpected Saudi production fall
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Aug 6 (Reuters) - Stock markets struggled on Monday as fears of a further escalation in the U.S.-China trade conflict offset prospects for more bumper corporate earnings, and broader market sentiment remained fragile.
Chinese state media launched an unusually personal attack against U.S. President Donald Trump’s trade policies on Monday, saying his trade “extortion” would not work.
The reports sought to reassure investors about Chinese economic strength as the dispute continues to rattle financial markets and raises worries about the impact on the real economy.
European shares initially followed their Asian counterparts lower - hurt by weak European bank earnings and trade fears - but a falling euro boosted exporters and helped halt the slide.
The pan-European share indexes were mixed, as were individual country markets. Germany’s DAX gained 0.22 percent while France’s CAC 40 slipped 0.08 percent and Britain’s FTSE 100 was flat.
The strength in German shares came despite the biggest plunge in German industrial orders in nearly 18 months.
The autos sector, which has been a proxy for investors’ worries over higher trade tariffs, led the gains.
European companies including Glencore, Lufthansa, UniCredit, Adidas and Commerzbank report this week.
The MSCI world equity index, which tracks shares in 47 countries, edged down 0.16 percent after large drops in the main Chinese indexes in Asian trading.
E-Minis for the S&P 500 were little moved, slipping in and out of positive territory.
Despite the better mood in European trading hours, the tariff conflict between the U.S. and China remains a live and dominant theme for markets.
“In his latest Twitter tirades and his latest appearances in front of his supporters the U.S. president has indicated something akin to a ‘strategy’ behind his trade war policy,” Commerzbank said. “The trade war will remain in place regardless of how much the Chinese cave in.”
China proposed tariffs on $60 billion worth of U.S. goods on Friday and a senior Chinese diplomat cast doubt on prospects of talks to resolve the row.
Trump has said his strategy of placing steep tariffs on Chinese imports is “working far better than anyone ever anticipated”, citing losses in China’s stock market. He predicted the U.S. market could “go up dramatically” once trade deals were renegotiated.
Worries about trade were evident in currency markets, with the dollar edging towards a one-year high.
The dollar index, which benefits as investors rush to safety, rose 0.3 percent to 95.425, a 2-1/2 week high.
The People’s Bank of China’s intervention last week to impose a reserve requirement on foreign exchange forward contracts had the desired impact of halting the slide in the yuan - in offshore markets, it fell 0.1 percent to 6.8574 , well away from the 6.91 weak point plumbed last week.
The yuan has been one of the main casualties from the trade conflict, with investors speculating that the PBOC was happy for the renminbi to weaken to counter the impact of tariffs.
Traders saw Friday’s move as an attempt by Chinese authorities to show they wanted stability, or even conciliation; others said the intervention would not prevent further yuan selling with Washington and Beijing still at loggerheads.
U.S. jobs data on Friday, while weaker than expected, underlined that the world’s largest economy is growing robustly, supporting synchronized global growth that had underpinned investor sentiment before the recent eruption of the trade dispute.
Markets are increasingly nervous about whether U.S. growth may have peaked, with concerns about rising tariffs exacerbating those fears.
The euro slipped 0.3 percent to $1.15300, a six-week low, while the stronger dollar sent the Swiss franc down half a percent.
“The trade war concerns are supporting the dollar and there is a bit of a risk-off tone in the markets,” said Manuel Oliveri, currency strategist at Credit Agricole.
The British pound hit 11-month lows after the UK trade minister warned Britain was headed for a no-deal Brexit.
Oil prices gained, helped by an unexpected decline in Saudi crude production. Brent crude futures rose more than 1 percent to $74.01, while U.S. crude oil futures traded as much as 1.5 percent higher at $69.58 a barrel.
Gold weakened on the back of a firmer dollar and was last down 0.4 percent at $1,208.77. (Additional reporting by Swati Pandey in SYDNEY and Helen Reid in LONDON Editing by Matthew Mpoke Bigg)