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GLOBAL MARKETS-Asia stocks slip, bonds rally on fears China-US trade deal unraveling

Shinichi Saoshiro


* Asian stock markets:

* Asia tracks Wall Street's overnight slide

* MSCI Asia-Pacific index hits lowest since late March

* Risk aversion supports bonds, U.S. 10-yr yield at 1-mth low

* New Zealand cuts interest rates, kiwi down

TOKYO, May 8 (Reuters) - Asian equities tracked Wall Street's slide on Wednesday, while investors switched to safe-haven government bonds, driven by fears that global growth will suffer as a potential trade deal between the United States and China appeared to be unraveling.

Beijing said on Tuesday that Chinese Vice Premier Liu He will visit Washington on Thursday and Friday for trade talks, setting up a last-ditch bid to salvage a deal that would avoid a sharp increase in tariffs on Chinese goods ordered by U.S. President Donald Trump.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.75 percent, stooping to its lowest level since late March.

The Shanghai Composite Index retreated 1.6 percent.

Australian stocks declined 0.6 percent, South Korea's KOSPI fell 0.5 percent and Japan's Nikkei was down 1.6 percent.

Wall Street stocks had slid on Tuesday, with the S&P 500 losing 1.65 percent and the Dow shedding 1.8 percent on the U.S.-China trade concerns.

Global stocks had a rocky start to the week after Washington on Monday accused Beijing of backtracking from commitments made during trade negotiations. That followed President Donald Trump's unexpected statement on Sunday that he would raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

"From an equity market perspective, the immediate focus is on the two-day talks scheduled to take place between the U.S. and Chinese officials," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

"However, it is difficult to imagine the two parties resolving their differences in just two days of talks. The markets may have to begin pricing in the trade conflict as a long-term factor once again."

Government bond prices surged and their yields fell sharply as investor panic took a toll on growth asset markets.

Benchmark 10-year yields on U.S. Treasuries, German bunds and Japanese government bonds (JGBs) sank to one-month lows.

Japan's 10-year yield burrowed deeper into negative territory and last stood at minus 0.060 percent.

In currency markets, the dollar declined for the fourth day and touched a six-week low of 110.09 yen.

The Japanese yen, a perceived safe-haven, often gains against its peers in times of market turmoil and political strife.

The euro was little changed at $1.1199 after ending the previous day nearly flat, and having held in a tight range for the last few sessions.

The New Zealand dollar was down 0.5 percent at $0.6560 after the country's central bank cut interest rates to 1.5 percent from 1.75 percent on Wednesday. The kiwi had earlier dropped to $0.6525, its lowest since November 2018.

The Australian dollar edged up 0.2 percent to $0.7022 .

The Aussie was on the front foot after the Reserve Bank of Australia kept its policy interest rate unchanged at 1.5 percent on Tuesday, defying expectations for a cut.

U.S. West Texas Intermediate crude futures rose 0.8 percent to $61.88 per barrel, recovering some ground after sinking 1.36 percent on Tuesday.

Crude oil prices had dropped as renewed U.S.-China trade worries stoked concerns of slower global growth crimping demand for commodities. But a relatively tight market conditions due to U.S. sanctions on Iran and Venezuela has provided underlying support for oil prices.

Brent crude oil futures were up 0.5 percent at $70.24 per barrel, pulling back from a one-month trough of $68.79 brushed on Monday. (Editing by Simon Cameron-Moore)