By Shinichi Saoshiro
TOKYO (Reuters) - World stocks extended a sell-off on Tuesday as escalating trade tussles between the United States and other major economies steered investors away from riskier assets, with markets in China bearing the brunt of investor anxiety.
Spreadbetters expected European shares to open slightly higher following the previous day's sharp losses, with Britain's FTSE gaining 0.25 percent, Germany's DAX rising 0.35 percent and France's CAC climbing 0.25 percent.
The tense atmosphere lifted demand for safe-haven U.S. Treasuries and kept the dollar on the defensive as financial markets worried about the wider global economic fallout of the Trump administration's "America First' agenda.
Asian equities were lower across the board after Wall Street tumbled, with the S&P 500 and Nasdaq suffering their steepest losses in more than two months overnight.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.27 percent.
Hong Kong's Hang Seng retreated 0.2 percent, the Shanghai Composite Index slid 0.8 percent, and Japan's Nikkei was down 0.1 percent after trimming most of its earlier losses.
Tech-heavy indexes such as South Korea's KOSPI and Taiwan's weighted index fell 0.45 percent and 0.55 percent, respectively.
Taiwan Semiconductor Manufacturing Co was down 1.8 percent, South Korean chipmaker SK Hynix Inc lost 1 percent and Japan's Tokyo Electron was down 0.6 percent. Chinese tech giant Tencent Holdings shed 0.3 percent.
Asian tech shares slid after U.S. peers, which derive much of their sales revenue from China, took a battering overnight.
Sparking the drop in tech shares and souring broader sentiment was a report on Monday that the U.S. Treasury Department was drafting curbs that would block companies with at least 25 percent Chinese ownership from investing in U.S. tech firms.
"Unlike the seemingly spur-of-the-moment tweets by President Trump and the retaliatory exchange of tariffs, Washington's bid to protect intellectual property is an issue at the heart of a trade row between two powers battling for future global supremacy," wrote Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo.
Besides the trade dispute with China, the United States has recently raised the stakes in a challenge to the European Union by threatening tariffs on cars imported from the bloc.
"The increasingly hawkish trade rhetoric the United States is employing could begin impacting the economy by cooling investor sentiment and curbing capital expenditure by corporations," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
"It's turning out to be a long-term bearish factor for the financial markets, as the United States is unlikely to back down at least through its midterm elections (in November)."
The dollar index against a basket of six major currencies dipped 0.1 percent to 94.202 and was headed for its fifth straight day of losses.
The greenback was pressured as long-term U.S. Treasury yields declined to one-week lows as prices rose on heightened risk aversion in financial markets.
The euro added to the previous day's gains and reached a near two-week high of $1.1722.
The dollar was down 0.3 percent at 109.460 yen, having fallen to a two-week low of 109.365 on Monday. The yen often attracts safe-haven bids in times of political tension and market turmoil.
Brent crude oil futures were up 0.15 percent at $74.83 on uncertainty over Libya's capacity to deliver on exports commitments. Brent futures had fallen 1 percent overnight as receding investor risk appetite weighed on commodities.
Oil prices were capped after OPEC and its allies on Friday agreed to increase global supplies, albeit modestly.
Trade concerns kept copper on the London Metal Exchange near a 2-1/2-month low of $6,702.5 per tonne brushed on Monday. Spot gold shed 0.1 percent to $1,263.62 an ounce.
(Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam and Eric Meijer)
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