* Wall Street opens lower as tariff worries return
* Oil turns positive as U.S. inventories seen lower
* Yields edge lower as fresh trade fears inspire risk-off
* Germany's DAX falls 1.5 pct
* Euro zone bond yields edged down
By Laila Kearney
NEW YORK, Aug 2 (Reuters) - A deepening trade dispute between the United States and China weighed on global stocks and bond yields on Thursday, prompting investors to shed risky assets in favor of safer ones amid uncertainty over future tariffs. trade spat between the world's top two economies intensified on Wednesday after U.S. President Donald Trump raised pressure on China by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports.
China on Thursday urged the United States to "calm down," but market participants remained unnerved.
"Markets are substantially weaker as investors are spooked out by the latest development in the trade battle," said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
On Wall Street, the Dow Jones Industrial Average .DJI fell 171.11 points, or 0.68 percent, to 25,162.71, the S&P 500 .SPX lost 7.29 points, or 0.26 percent, to 2,806.07, and the Nasdaq Composite .IXIC added 14.66 points, or 0.19 percent, to 7,721.94.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.75 percent, while the pan-European FTSEurofirst 300 index .FTEU3 lost 1.01 percent.
Germany's blue-chip index DAX .GDAXI , which is seen as a trade war proxy, fell 1.67 percent while the broader pan-European STOXX 600 .STOXX was down about 0.9 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 1.6 percent down, dragged down by a 1.8 percent fall in Chinese H-shares .MICN00000PUS. .
Benchmark U.S. government bond yields edged lower as the market sought safe-haven debt in Treasuries amid the trade dispute. in risk-off mode after the back and forth between China and the U.S. on tariffs," said Priya Misra, head of global rates strategy at TD Securities in New York. "You're already seeing (trade tension) affect investment decisions globally, so it is a growth concern."
Euro zone government bond yields dipped, and borrowing costs in Germany and France pulled back from seven-week highs.
Analysts blamed the retreat in world stock markets on uncertainty around the trade policy of the Trump administration, even as recent corporate results and economic data have been seen as encouraging.
"One needs to have a strong gut feeling to invest in this environment and in August, I doubt many people will have one," said Herve Goulletquer, deputy head of research at France's La Banque Postale Asset Management in Paris.
He said investors badly needed a "framework of interpretation" to read through the trade statements of the Trump administration and the poor visibility on that front was holding markets back.
On Wednesday, the Federal Reserve kept interest rates unchanged as expected, characterizing the U.S. economy as strong and staying on track to increase borrowing costs in September and likely again in December.
Gold prices held steady on the news after falling 11 percent since April to its lowest in a year. gold XAU= dropped 0.1 percent to $1,214.39 an ounce. U.S. gold futures GCcv1 fell 0.39 percent to $1,222.80 an ounce.
Oil prices climbed on Thursday, reversing course after a report suggested crude stockpiles at the U.S. storage hub at Cushing, Oklahoma fell in the latest week. crude CLcv1 rose 0.99 percent to $68.33 per barrel and Brent LCOcv1 was last at $72.72, up 0.46 percent on the day.