* Upbeat data lures back investors to U.S. stocks, dollar steadies
* Brazilian benchmark stock index tumbles
* Yield rise as stocks gain, political concerns remain (Updates prices, adds oil settlements)
By Saqib Iqbal Ahmed
NEW YORK, May 18 (Reuters) - U.S. stocks recovered ground on Thursday as stronger-than-expected U.S. economic data soothed nerves a day after U.S. biggest selloff in more than eight months, but a key index of global equity markets remained near a three-week low.
Robust U.S. economic data helped the U.S. dollar reverse early losses against a basket of major currencies as focus turned to a widely anticipated increase in overnight interest rates by the Federal Reserve.
Still, reports that Trump had tried to intervene in an investigation into alleged Russian meddling in last year's U.S. presidential election, and that his aides had numerous undisclosed contacts with Russian officials kept market tensions high.
Adding to market jitters across the Americas, Brazilian stocks triggered a 30-minute halt to trading after the benchmark Bovespa index fell 10 percent following a report President Michel Temer gave his blessing to an attempt to pay to silence a potential witness in the country's biggest-ever graft probe.
The iShares MSCI Brazil ETF tumbled 13.8 percent in 8.9 times the average volume over the past 10 trading days.
The MSCI's all-country world equity index was down 0.33 percent after dipping to its lowest since April 25 earlier in the day.
The index found some support on Wall Street. U.S. stocks recovered ground after a near 2 percent selloff on Wednesday on the S&P 500, as upbeat economic data emboldened investors to return to the market.
"This whole bull market is all about panic attacks followed by relief rallies, and this was another one…," Ed Yardeni, president of Yardeni Research Inc in Brookville, New York.
New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labor market slack.
The Dow Jones Industrial Average rose 104.67 points, or 0.51 percent, to 20,711.6, the S&P 500 gained 14.1 points, or 0.60 percent, to 2,371.13 and the Nasdaq Composite added 49.90 points, or 0.83 percent, to 6,061.14.
The pan-European FTSEurofirst 300 index closed down 0.89 percent at 7,436.42 ending off lows.
U.S. Treasury yields rose from one-month lows as stocks recovered from Wednesday's dramatic drop, reducing demand for safe-haven bonds.
The 10-year notes were down 5/32 in price to yield 2.23 percent, up from 2.22 percent late on Wednesday.
Spot gold dropped 1.0 percent to $1,247.36 an ounce.
The U.S. dollar reversed early losses against a basket of major currencies getting a boost from the better-than-expected U.S. data.
"The readings on jobless claims and the Philly Fed index back expectations for faster (second quarter) growth and a Fed rate hike next month," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The dollar index rose 0.39 percent, with the euro down 0.57 percent to $1.1094.
In commodities markets, oil prices rose ahead of next week's Organization of the Petroleum Exporting Countries meeting as key producing countries suggested they would adhere to production cuts to reduce a global crude glut.
Benchmark Brent crude futures ended the session 30 cents higher at $52.51 a barrel while U.S. crude futures settled up 28 cents at $49.35.
Reporting by Rodrigo Campos, additional reporting by Lewis Krauskopf, Karen Brettell and Dion Rabouin; Editing by Nick Zieminski