(Updates prices, changes comments, dateline; previous LONDON)
* Brexit tensions hit the pound
* Safe havens yen, gold shine in flight to safety
* Worries over health of world economy hit oil
By Rodrigo Campos
NEW YORK, Oct 8 (Reuters) - Oil prices and stocks across major markets fell on Tuesday as tension rose between China and the United States ahead of high-level trade talks, while the British pound sank on reports that Brexit negotiations were close to breaking down.
Gold and the yen rose, indicating increased appetite for safe-haven assets.
Washington widened its trade blacklist to include some of China's top artificial intelligence start-ups, punishing Beijing for its treatment of Muslim minorities and ratcheting up tensions ahead of trade talks in Washington this week.
"I don't think there's really much hope that we are going to see a completed deal any time soon," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. "For markets, it may be enough to just see a stop in the escalation."
The Dow Jones Industrial Average fell 275.45 points, or 1.04 percent, to 26,202.57, the S&P 500 lost 34.18 points, or 1.16 percent, to 2,904.61 and the Nasdaq Composite dropped 90.80 points, or 1.14 percent, to 7,865.50.
The pan-European STOXX 600 index lost 0.92 percent and MSCI's gauge of stocks across the globe shed 0.91 percent.
Boosted by gains in Asia, emerging market stocks rose 0.01 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.22 percent higher, while Japan's Nikkei rose 0.99 percent.
Chinese mainland stocks returned from a week-long holiday with a 0.3% rise, but a private survey showed growth in China's services sector at its slowest in seven months in September.
With the focus turning to trade talks, U.S. President Donald Trump said he hoped Beijing would find a humane and peaceful resolution to political protests in Hong Kong, and said that situation had the potential to hurt the trade discussions.
An increase in U.S. tariffs on $250 billion worth of Chinese goods, to 30% from 25%, is scheduled for Oct. 15. Trump has said it will take effect if no progress is made in the negotiations.
The flight to safety also added to pressure in fixed income markets with German bund yields edging lower.
U.S. Treasury yields fell as expectations of a Federal Reserve interest rate cut in October rose following a big drop in the U.S. producer price index and an intensification of trade tensions with China.
Benchmark 10-year Treasury notes last rose 10/32 in price to yield 1.5187 percent, from 1.553 percent late on Monday.
Markets will keenly watch comments from U.S. Federal Reserve Chairman Jerome Powell after weak data raised concerns the U.S. economy may be heading toward a protracted slowdown.
Despite expectations for lower rates, the U.S. dollar rose against a basket of peers.
The dollar index rose 0.2 percent, with the euro down 0.21 percent to $1.0947.
Sterling tumbled after reports that Brexit talks between Britain and Brussels were close to breaking down.
The EU accused Britain of playing a "stupid blame game" after a Downing Street source said a deal was essentially impossible because German Chancellor Angela Merkel had made unacceptable demands.
Sterling last traded at $1.2205, down 0.69 percent on the day.
The safe-haven yen strengthened 0.18 percent versus the greenback at 107.11 per dollar.
In emerging currency markets the focus remained on the Turkish lira, which edged higher after hitting a five-week low in early trade over concerns about a planned Turkish military incursion in northern Syria.
Trump threatened to destroy Turkey's economy if Ankara took those moves too far, after the U.S. leader opened that door by ordering the withdrawal of U.S. troops from the area.
The Turkish lira was flat versus the U.S. dollar at 5.83 after falling more than 2% on Monday.
New IMF Managing Director Kristalina Georgieva said trade tensions could mean a loss of around $700 billion by 2020, or about 0.8 percent of global GDP.
Worries over the health of the global economy sent oil prices lower. U.S. crude fell 0.95 percent to $52.25 per barrel and Brent was last at $57.88, down 0.81 percent on the day.
Spot gold added 0.6 percent to $1,502.62 an ounce. U.S. gold futures gained 0.25 percent to $1,501.50 an ounce.
Copper lost 0.47% to $5,695.00 a tonne.
Reporting by Rodrigo Campos; additional reporting by Karin Strohecker in London, Shreyashi Sanyal and Arjun Panchadar in Bengaluru, and Kate Duguid and Saqib Iqbal Ahmed in New York; Editing by Dan Grebler