(Corrects pronoun in paragaph 18. The error also appeared in earlier versions of Global Markets.)
* Asian stock markets : tmsnrt.rs/2zpUAr4
* Nikkei fall 2.3%, Asia shares ex-Japan -2%
* Yields, emerging currencies dive amid safe-haven rush
* Yuan under pressure as trade war escalates
* Gold jumps to highest since April 2013, oil skids
By Wayne Cole
SYDNEY, Aug 26 (Reuters) - Asian shares sank on Monday as the latest salvo in the Sino-U.S. trade war shook confidence in the world economy and sent investors steaming to the safe harbours of sovereign bonds and gold, while slugging emerging market currencies.
Yields on benchmark 10-year Treasury debt dropped to their lowest since mid-2016, while gold hit its highest since April 2013 as risk was shunned.
There was some relief that China fixed the yuan's midpoint at a relatively steady 7.0570 per dollar when it had been trading as weak as 7.1850 offshore, countering concerns Beijing would let the currency slide to keep exports competitive.
MSCI's broadest index of Asia-Pacific shares outside Japan still shed 2.0%, and Australia 1.5%.
Japan's Nikkei lost 2.3%, while Shanghai blue chips fell 1.2%. E-Mini futures for the S&P 500 eased 0.8%, and EUROSTOXX 50 futures 1.1%.
Wall Street nose-dived on Friday when President Donald Trump announced a 5% additional duty on $550 billion in targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. products.
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.
Trump is now set to hold a joint news conference with French President Emmanuel Macron later on Monday.
"There is an uneasy feeling that the very fragile negotiations are spiralling out of control," wrote analysts at ANZ in a note.
"The escalation suggests uncertainty will continue to weigh on global trade, industrial production and investment, with no sign of a resolution."
The latest broadside 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.
The markets clearly believe, however, the Fed will have to act aggressively and are fully priced for at least a quarter-point cut in September and more than 110 basis points of easing by the end of 2020.
"Trump shows no signs of moderating his destructive trade policies," said JPMorgan 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 on 10-year Treasury notes were down at 1.48%, having dived from a top of 1.66% on Friday, leaving them almost matching two-year yields.
"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 initially swept the legs out from under the dollar, which slid 0.5% on Friday against a basket of currencies and was last trading at 97.654.
It took an early hit on the yen to touch 104.47, but pared the losses as the session wore on and was last at 105.21. The next major chart point is a low around 104.10 briefly touched during the "flash-crash" of early January.
The euro was firm at $1.1143, 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 fared better elsewhere, making inroads on most emerging market currencies. The Turkish lira briefly tumbled as far as 6.4700 per dollar at one stage.
Spot gold got a boost from the slide in yields, rising 1.1% to $1,544.23 per ounce and touching its highest since April 2013.
Oil prices went the other way on worries the tariffs dispute would crimp world demand.
Brent crude futures slid 68 cents to $58.66, while U.S. crude lost 79 cents to $53.38 a barrel.
Reporting by Wayne Cole; Editing by Sam Holmes and Richard Borsuk