* ECB President Draghi stimulus hints shake markets
* Bond yields slump, German yields hit fresh record low
* Trump says will meet with China's Xi, trade talks set to restart
* MSCI global stocks index jumps, Wall St up over 1%
* Oil prices surge in wake of Trump's China comments (Updates with afternoon U.S. trading)
By Lewis Krauskopf
NEW YORK, June 18 (Reuters) - Global stocks rallied on Tuesday and benchmark government bond yields tumbled after European Central Bank President Mario Draghi hinted at economic stimulus, while equities got an extra boost when U.S. President Donald Trump confirmed a meeting with China's president amid the countries' trade dispute.
The euro also slid after Draghi said the region's central bank will ease policy again if inflation fails to accelerate, signaling one of the biggest policy reversals of his eight-year tenure.
Draghi's comments fed beliefs that the Federal Reserve would also soon start easing monetary policy, with the U.S. central bank set to give its policy statement on Wednesday.
“It’s our view that the markets have been ahead of the central banks globally in signaling that there is a global economic slowdown underway, and that monetary policy in light of the current conditions are probably too tight and central banks need to reverse course, especially the Federal Reserve,” said Brad Peterson, regional portfolio advisor at Northern Trust Wealth Management in Chicago.
"We are getting confirmation of that in Europe and expect the same out of the Fed here this week," Peterson said.
The Fed is expected to leave borrowing costs unchanged at its meeting this week but possibly lay the groundwork for a rate cut later this year.
Trump has sought to influence the Fed to cut rates. In response to Draghi's comments, Trump on Tuesday accused the ECB president of trying to weaken the euro to gain an unfair competitive advantage.
Separately, Trump said he would meet with Chinese President Xi Jinping at the G20 summit later this month, and that trade talks between the two countries were set to restart ahead of time.
MSCI's gauge of stocks across the globe gained 1.06%.
On Wall Street, the Dow Jones Industrial Average rose 340.8 points, or 1.31%, to 26,453.33, the S&P 500 gained 29.06 points, or 1.01%, to 2,918.73 and the Nasdaq Composite added 112.97 points, or 1.44%, to 7,957.99.
The pan-European STOXX 600 index rose 1.67%, its best day since January.
Benchmark bond yields fell globally following Draghi's hints of more stimulus, with German bond yields hitting record lows deep in negative territory, around -0.32%, and French 10-year yields turning negative for the first time.
"We're not that far from a 'whatever it takes' moment in the sense that the key message was they will do whatever it takes to avoid a worsening of macro conditions by year-end," said Didier Borowski, head of global macroeconomic research at Amundi.
Benchmark U.S. 10-year notes last rose 7/32 in price to yield 2.063%, from 2.086% late on Monday.
The dollar index, which measures the greenback against a basket of currencies, rose 0.06%, with the euro down 0.16% to $1.1199.
Oil prices rose sharply after Trump confirmed his meeting with Xi.
U.S. crude rose 3.43% to $53.71 per barrel and Brent was last at $62.04, up 1.81% on the day.
(Additional reporting by Abhinav Ramnarayan and Thyagaraju Adinarayan in London; Editing by Mark Heinrich, Nick Zieminski and Jonathan Oatis)
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