* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei falls 2.1%, S&P 500 futures -0.7%
* Yields, emerging currencies dive amid safe-haven rush
* Yuan under pressure, Beijing holds the line
* Gold jumps to highest since April 2013, oil skids
By Wayne Cole
SYDNEY, Aug 26 (Reuters) - Asian shares sank on Monday as the latest salvos in the Sino-U.S. trade war shook confidence in the world economy and sent investors steaming to the safe harbour of sovereign bonds and gold, while slugging emerging market currencies.
Global stocks looked set to follow Asia's slide, with E-Mini futures for the S&P 500 ESc1 falling 0.7%, and EUROSTOXX 50 futures STXEc1 down 1.1%.
Yields on benchmark 10-year Treasury debt US10YT=TWEB dropped to their lowest since mid-2016, while gold hit its highest since April 2013 as risk was shunned.
On Friday, U.S. President Donald Trump announced an additional duty on some $550 billion of targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. goods. onshore yuan CNY=CFXS fell 0.6% to new 11-year lows. But there was some relief that the central bank fixed the official midpoint at a relatively steady 7.0570 per dollar when it had been trading as weak as 7.1850 offshore CNH=D3 , countering concerns Beijing would let the currency slide to keep exports competitive amid mounting U.S. tariffs.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shed 2.0%, and Australia .AXJO 1.5%.
Japan's Nikkei .N225 lost 2.1%, while Shanghai blue chips .CSI300 fell 1.2%.
"Downside risks are increasing for both the global economy and markets," said Mark Haefele, global chief investment officer at UBS. "As a result, we are reducing risk in our portfolios by moving to an underweight in equities to lower our exposure to political uncertainty."
"We continue to favour carry strategies in credit and foreign exchange markets, which benefit from central bank easing in a low-growth environment."
Trump's new tariff measures were announced after U.S. markets closed on Friday. But Wall Street had nose-dived earlier in the session after Trump said U.S. companies should "immediately start looking for an alternative to China", in response to Beijing's latest retaliation. .N
At the G7 meeting in France over the weekend, Trump caused some confusion by indicating he may have had second thoughts on the tariffs.
But the White House said on Sunday that Trump wished he had raised tariffs on Chinese goods even higher last week, even as he signalled he did not plan to follow through with a demand that U.S. firms close operations in China. is now set to hold a joint news conference with French President Emmanuel Macron later on Monday. latest trade escalation overshadowed a pledge by Federal Reserve Chair Jerome Powell to "act as appropriate" to keep the U.S. economy healthy, although he stopped short of committing to rapid-fire rate cuts. markets clearly believe the Fed will have to act more aggressively and are fully priced for at least a quarter-point cut in September and more than 120 basis points of easing by the end of 2020. FEDWATCH
"Trump shows no signs of moderating his destructive trade policies," said JPMorgan (NYSE:JPM) analyst Adam Crisafulli.
"Central banks can't fully ameliorate the downside of a global trade war," he added. "Companies will enter lockdown mode in terms of spending, and eventually hiring, until at least the November 2020 election amid all the uncertainty."
YIELDS RACE LOWER
Yields on 10-year Treasury notes US10YT=RR were down at 1.46%, having dived from a top of 1.66% on Friday, leaving them just below two-year yields and inverting the curve.
"We continue to remain long 10's, targeting 1.3% due to a combination of weakness in the global economy and trade war uncertainty filtering through into a weaker U.S. economy," said Priya Misra, head of global rates strategy at TD Securities.
"This will force the Fed to ease beyond a 'mid-cycle adjustment to policy'," she added. "We believe that the market is underpricing the risks of additional rate cuts in 2020."
The drop in yields swept the legs out from under the dollar, though it rallied steadily through the session thanks in part to heavy buying against emerging market currencies.
After an early hit on the yen to 104.47, it recovered most of the lost ground to stand at 105.33 JPY= . The next major chart point is a low around 104.10 briefly touched during the "flash-crash" of early January.
Against a basket of currencies, it was a shade firmer at 97.673 .DXY having bounced from 97.477.
The euro was firm at $1.1145 EUR= , having climbed 0.6% on Friday, although restrained somewhat by speculation the European Central Bank will also have to ease aggressively next month.
The dollar made inroads on most emerging market currencies, with the Turkish lira TRY=D3 briefly tumbling as far as 6.4700 per dollar at one stage.
Spot gold got a boost from the slide in yields, rising 0.9% to $1,539.33 per ounce XAU= and touching its highest since April 2013.
Oil prices went the other way on worries the tariff dispute would crimp world demand. O/R
Brent crude LCOc1 futures slid 68 cents, or 1.1%, to $58.66, while U.S. crude CLc1 lost 79 cents to $53.38 a barrel.
https://tmsnrt.rs/2zpUAr4 Asia-Pacific valuations
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