June 19, 2018 / 5:28 AM / a month ago

GLOBAL MARKETS-Asia stocks slide to 4-month low as Trump raises stakes in China trade war

* MSCI Asia-Pacific index slides to lowest since early Feb

* Spreadbetters expect European stocks to open lower

* Risk sentiment hurt as Trump threatens China with new tariffs

* Yen, Treasuries and gold gain

* Crude oil prices dip after overnight rally loses steam

By Shinichi Saoshiro

TOKYO, June 19 (Reuters) - A sell-off in Chinese stocks drove Asian equities to a four-month low on Tuesday, as U.S. President Donald Trump threatened new tariffs on Chinese goods in an escalating tit-for-tat trade war between the world's two biggest economies.

Spreadbetters expect European stocks to follow their Asian peers and open lower, with Britain's FTSE dropping 0.3 percent, Germany's DAX shedding 0.7 percent and France's CAC losing 0.75 percent.

Trump warned on Monday that Washington would impose a 10 percent tariff on $200 billion of Chinese goods after Beijing's decision to raise tariffs on $50 billion in U.S. goods, which was in retaliation for U.S. tariffs announced on Friday.

Trump said if China increases its tariffs again in response to the latest U.S. move, "we will meet that action by pursuing additional tariffs on another $200 billion of goods."

China warned it will take "qualitative" and "quantitative" measures if the U.S. government publishes an additional list of tariffs on its products.

The trade frictions have unnerved financial markets, with investors and businesses increasingly worried that a full-blown trade battle could derail global growth.

"Trump appears to be employing a similar tactic he used with North Korea, by blustering first in order to gain an advantage in negotiations. The problem is, such a tactic is unlikely to work with China," said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

"A U.S.-China trade spat alone won't hurt global growth. But there is always potential for Trump to keep increasing his threats which could have broader implications. Increasing trade has helped growth in emerging markets and this could be negatively affected."

MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.2 percent to its lowest since early February, dragged down by a slide in Chinese shares.

The Shanghai Composite Index dropped 3 percent and plumbed its lowest since July 2016 and Hong Kong's Hang Seng shed more than 2 percent.

"China's economy has already been clouded by a sharp slowdown in fixed asset investment growth due to the government's deleveraging drive, a problematic property sector, a mounting debt burden and rising credit defaults," economists at Nomura wrote.

"The rising risk of a disruptive trade conflict makes a bad situation tentatively worse."

Japan's Nikkei lost 1.4 percent, South Korea's KOSPI retreated 0.9 percent while Australian stocks bucked the trend and added 0.2 percent helped by a depreciating currency and an overnight bounce in commodity prices.

S&P 500 futures were off 0.85 percent, pointing to a another down day for Wall Street shares which slipped on Monday.

The dollar fell 0.75 percent to 109.715 yen following Trump's tariff comments. The yen is often sought in times of market turmoil and political tensions.

The euro was 0.1 percent firmer at $1.1633.

China's yuan skidded to a five-month low. The Australian dollar, often seen as a proxy to China-related trades, brushed a one-year low of $0.7393.

In commodities, crude oil markets remained volatile ahead of Friday's OPEC meeting at a time when Russia and Saudi Arabia are pushing for higher output.

Brent crude futures fell 0.65 percent to $74.87 a barrel after rallying 2.5 percent overnight.

Lower-risk assets gained on the latest round of trade threats.

Spot gold was up 0.35 percent at $1,283.02 an ounce. The 10-year U.S. Treasury note yield touched 2.882 percent, its lowest since June 1.

Reporting by Shinichi Saoshiro Editing by Kim Coghill and Jacqueline Wong

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