* European stocks with Asian exposure, chipmakers gain
* Autos, suppliers up as much as 1.1%.
* In Germany, Daimler up on cost-cutting report
* Sterling below $1.27 for first time since mid-Jan
By Tom Arnold
LONDON, May 21 (Reuters) - Stocks markets gained on Tuesday, with chipmakers and stocks exposed to Asia among the best performers, after Washington temporarily eased trade restrictions imposed last week on China's Huawei.
U.S. President Donald Trump's government added Huawei to a trade blacklist last week, escalating trade tensions between the world's two biggest economies.
Washington then allowed Huawei Technologies Co Ltd to purchase American-made goods to maintain existing networks and provide software updates to existing Huawei handsets until Aug. 19.
"The Huawei extension is in some sense providing a relief rally as it eases the worst fears of market participants that we are drifting towards a fully-fledged trade war," said Aberdeen Standard's head of global strategy, Andrew Milligan.
The autos and suppliers sector .SXAP was another top gainer, up as much as 1.1%.
The MSCI index of world shares .MIWD00000PUS , which tracks shares in 47 countries, was little changed at 0.01%.
"Equity markets remain hostage to developments in the ongoing US-China trade battle," said Rupert Thompson, head of research at Kingswood.
"We still believe some kind of deal will eventually be reached - most likely at a Xi/Trump meeting at the G20 Summit in late June."
In Germany, Daimler DAIGn.DE got an additional boost after German newspaper Handelsblatt reported the company was looking to cut administration costs by 20%. biggest phone group Telecom Italia TLIT.MI led gainers on the STOXX 600 after posting first-quarter earnings in-line with expectations and confirming its guidance for the next three years. SLIPS
In currency markets, the British pound fell below $1.27 for the first time since mid-January, hit by dollar strength and expectations that Prime Minister Theresa May will fail to persuade cabinet colleagues to back an amended version of her Brexit withdrawal deal.
The pound slipped 0.2% to $1.2688 while against the euro it was down 0.14% to a new four-month low of 87.88 pence GBP=D3 , EURGBP=D3 . US dollar was supported by some safe haven inflows, while Australia's top policymaker Philip Lowe said on Tuesday the central bank will consider the case for lower interest rates at its June policy meeting, pushing the Aussie dollar AUD=D3 lower half a percent to $0.6873. prices edged higher on U.S.-Iran tensions and amid expectations that producer club OPEC will continue to withhold supply this year.
Brent crude futures LCOc1 , the international benchmark for oil prices, were at $72.18 per barrel at 0651 GMT, up 21 cents, or 0.3 percent, from their last close.
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