By Herbert Lash

NEW YORK (Reuters) - World equity markets rebounded on Friday from the previous day's sharp fall, after U.S. President Donald Trump said complaints against China's Huawei Technologies Co Ltd might be resolved within the framework of a Sino-U.S. trade deal.

Tensions remained high, with China accusing U.S. Secretary of State Mike Pompeo of fabricating rumors after he said Huawei's chief executive was lying about the telecom network gear maker's ties to the Chinese government.

On Thursday, Trump said a trade deal could resolve U.S. complaints against Huawei, but he also called the company "very dangerous."

"Today's action is mostly based on sentiment because the overall market is trading at a full valuation," Rahul Shah, CEO of Ideal Asset Management in New York, said of equities.

Investments remain highly susceptible to headline risk, Shah said, though investors took in stride a U.S. Commerce Department report that said new orders for domestic capital goods fell more than expected in April.

The report also showed March orders were not as strong as previously thought, and shipments were weak over the last two months, further evidence that manufacturing and the U.S. economy were slowing.

MSCI's gauge of stock performance across 47 countries gained 0.39%, while the pan-European STOXX 600 index closed up 0.56%.

Investors appeared unfazed by British Prime Minister Theresa May's resignation as Conservative party leader after failing in a final attempt to win parliamentary support for her deal to exit the European Union.

On Wall Street, the Dow Jones Industrial Average rose 95.22 points, or 0.37%, to 25,585.69. The S&P 500 gained 3.82 points, or 0.14%, to 2,826.06 and the Nasdaq Composite added 8.73 points, or 0.11%, to 7,637.01.

For the week, the Dow fell 0.68%, the S&P 500 slid 1.16% and the Nasdaq declined 2.29%.

The dollar edged off two-year highs set on Thursday, pressured as the weak U.S. manufacturing activity data sparked worries the trade conflict with China may hurt the world's largest economy.

Against a basket of six major currencies, the dollar was down 0.29% at 97.575, well off the two-year high of 98.371 the previous session.

The euro rose 0.24% to $1.1207 while the Japanese yen strengthened 0.27% versus the greenback at 109.29.

U.S. Treasury yields rose, as Trump's remarks about Huawei encouraged investors to book profits a day after a surge in government bond prices and ahead of a long U.S. holiday weekend.

Benchmark 10-year U.S. Treasury notes fell 8/32 in price to push yields up to 2.3237%.

U.S. markets will close on Monday for Memorial Day, a federal holiday.