* China agriculture delegation scraps U.S. farm visit to Montana
* MSCI world equity index slips
* Central bank easing helps risk sentiment but trade tensions hurt
* Treasury yields fall; dollar falls vs yen
* Oil prices edge higher (Updates to U.S. close of trading)
By Saqib Iqbal Ahmed
NEW YORK, Sept 20 (Reuters) - An index of global stock markets surrendered early gains on Friday after Chinese agriculture officials who were to visit U.S. farm states next week canceled their trip, dampening optimism on U.S.-China trade talks.
Renewed worries about the state of the ongoing trade tensions between Washington and Beijing drove Treasury yields lower and pushed the U.S. dollar down against the safe-haven Japanese yen.
Stocks had started the day stronger as stimulus measures by major central banks eased worries about growth. But optimism faded following the report that the Chinese officials canceled their visit.
The cancellation came as U.S.-Chinese trade talks were held in Washington and U.S. President Donald Trump said he wanted a complete trade deal, not just an agreement for China to buy more U.S. agricultural goods.
The MSCI world equity index, which tracks shares in 47 countries, was 0.23% lower.
On Wall Street, stocks, which had started the day strong following China cutting a key lending rate for the second straight month, reversed course on the news of the canceled farm visits.
Equity markets have largely welcomed the central bank moves in recent days, including interest rates cuts by the European Central Bank and the U.S. Federal Reserve.
For months, Wall Street has bounced up and down with signs of improvement or deterioration in trade talks, often based on comments or tweets from Trump, a cycle investors have grown accustomed to.
"In this case, it's a bit more concerning because it's China making the decision, rather than Trump," said Willie Delwiche, markets strategist at Baird in Milwaukee.
The Dow Jones Industrial Average fell 159.72 points, or 0.59%, to end at 26,935.07, the S&P 500 lost 14.72 points, or 0.49%, to close at 2,992.07 and the Nasdaq Composite dropped 65.21 points, or 0.8%, to finish at 8,117.67.
The pan-European STOXX 600 index closed up 0.29%, after giving up some of the gains logged earlier in the session.
Increased concerns that the United States and China are unlikely to forge a trade deal in the near term drove U.S. Treasury yields lower.
Benchmark 10-year notes gained 15/32 in price to yield 1.7215%, down from 1.774% on Thursday.
Bonds were also supported after the New York Federal Reserve said it plans to pour cash into the U.S. banking system through early October to avert another market disruption, after the cost of loans in the overnight repurchase agreement (repo) market soared to 10% on Tuesday.
In foreign exchange markets, the dollar fell sharply against the yen as investors weighed the latest developments on the U.S.-China trade front.
The yen tends to attract demand in times of market stress as the currency is backed by Japan's current account surplus, which offers it more resilience than currencies of deficit-running countries.
The dollar was 0.43% lower against the Japanese currency. Against a basket of major currencies, the greenback was up 0.2%.
Oil prices eased on Friday on renewed concern over the U.S.-China trade dispute, but futures still posted weekly gains, with Brent marking its biggest weekly increase since January after an attack on Saudi Arabia's energy industry last weekend.
Brent crude LCOc1 futures fell 12 cents to settle at $64.28 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 futures ended 4 cents lower at $58.09 a barrel.
Lingering tensions in the Middle East along with increased worries about the trade tensions supported gold, which was on pace for its first weekly rise in four. Spot gold was up 1.12% at $1,515.78 an ounce.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Stephanie Kelly in New York, Noel Randewich in San Francisco, Ambar Warrick and Medha Singh in Bengaluru, Julia Payne in London, Florence Tan in Singapore; Editing by Will Dunham