* ASX down over 2%, banks and miners weigh
* Energy sub-index set for worst day in 1-1/2 yrs
* Rare earths miner Lynas gains amid trade war woes, Malaysia license news
By Devika Syamnath
August 6 (Reuters) - Australian stocks tumbled 2.4% on Tuesday and looked set for their worst day over a year as the rapidly escalating Sino-U.S. trade dispute prompted investors worldwide to dump riskier assets.
Washington designated Beijing a currency manipulator following an unexpectedly sharp drop in the yuan on Monday, setting off further falls for battered global stocks. MKTS/GLOB
Australia's benchmark S&P/ASX 200 index .AXJO slumped 158.1 points to 6,482.2 by 0202 GMT. It has lost about 2.5% since last Thursday when U.S. President Donald Trump abruptly said the U.S. would slap 10% tariffs on $300 billion of Chinese goods.
China is Australia's biggest export customer.
"There are two words to describe market sentiment right now - panic and fear," said BK Asset Management in a note.
"The promise of global central bank easing is not enough of a reason to buy into this weakness and we will likely see the Asian indexes extend their respective slides into bear-market territory," said OANDA in a note to clients.
Australia's mining .AXMM and energy .AXEJ indexes gave up as much as 1.7% and 4.2%, respectively.
Mining major BHP Group BHP.AX declined as much as 3.1% to its weakest in over two months, while Fortescue Metals Group FMG.AX lost up to 7.1%.
However, rare earths miner Lynas Corp LYC.AX jumped as much as 7.1% and was among the top gainers on the benchmark. Its Malaysian rare earths processing plant's license is set to be extended, sources told Reuters. earths have been in focus since reports that suggested the minerals could be brought into the U.S.-China trade war. China is a major global supplier.
Oil and gas company Santos Ltd STO.AX fell to its lowest level in over five months, while bigger rival Woodside Petroleum WPL.AX hit an over seven-month low.
Heavyweight financial stocks also weakened, with the "big four" banks down as much as 2.5%-3.4%.
Tech stocks .AXIJ were the biggest percentage decliners, with data solutions provider Appen APX.AX down as much as 3.4%.
Gold stocks .AXGD were the lone gainers as wider market turmoil raised the metal's safe-haven appeal. Newcrest Mining NCM.AX gained as much as 3.2% to scale a near eight-year peak.
In New Zealand, the benchmark S&P/NZX 50 index .NZ50 dropped 2% to 10,549.52 at 0200 GMT.
Electronic payment platform Pushpay Holdings PPH.NZ lost the most on the benchmark and hit an over four-month low.