* U.S., European shares follow Asia lower on trade angst
* Beijing vows retaliation after USTR signals tariff hike
* Trump says China "broke the deal"; talks resume Thursday
* Asia, EM stocks at 2-month lows, SKorea sinks 3 percent
By Sinéad Carew
NEW YORK, May 9 (Reuters) - Equity indexes around the world tumbled for a fourth day in a row on Thursday as U.S.-China trade tensions put investors on edge the day before U.S. President Donald Trump was due to raise tariffs on Chinese goods.
Oil prices fell as worries about the trade war outweighed a surprise drop in U.S. inventories. U.S. Treasury yields neared a six-week low while the dollar lost ground against Japan's yen as investors sought a safe haven currency.
China asked the United States to meet it halfway, while its chief negotiator was in Washington for talks in the hope of staving off a U.S. tariff hike on $200 billion of Chinese goods to 25% from 10% at 12.01 AM EDT on Friday. Street's main indexes followed European equities lower after stocks in China tumbled.
"Investors are worried about the clash of the titans," said Joseph Quinlan head of market strategy for Merrill and Bank of America (NYSE:BAC) Private Bank in New York.
"It's the knock-on effect on the rest of the world in terms of potential disruptions to global supply chains, the decline in investor confidence, business confidence and consumer confidence. And we're getting closer to striking midnight."
Beijing has said it would retaliate against the tariff hike while Trump insisted that China "broke the deal." we're talking about how this escalates ... How does China respond," said Quinlan. "It's going to hurt. But what's more important is the uncertainty it creates."
The Dow Jones Industrial Average .DJI fell 374.81 points, or 1.44%, to 25,592.52, the S&P 500 .SPX lost 35.31 points, or 1.23%, to 2,844.11 and the Nasdaq Composite .IXIC dropped 117.96 points, or 1.49%, to 7,825.36.
The pan-European STOXX 600 index .STOXX lost 1.62% and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.35%.
In U.S. Treasuries, 10-year yields hit 2.424, the lowest point since April 1. 10-year notes US10YT=RR last rose 12/32 in price to yield 2.4405%, from 2.483% late on Wednesday.
"In the event of a complete breakdown in (trade) talks and higher tariffs, we would expect this to see U.S. stocks trade 10 to 15 percent below their highs and a fall of around 15 to 20 percent in the Chinese market," said Mark Haefele, global chief investment officer at Global Wealth Management at UBS.
In currencies, the yen surged to a three-month high against the dollar and the Swiss franc was at a one-month high as investors eyeing escalating trade conflict, sought out the safe currencies. The greenback declined 0.5 against the yen.
The dollar index .DXY fell 0.3%, with the euro EUR= up 0.36% to $1.1231.
Spot gold XAU= added 0.3% to $1,284.30 an ounce.
U.S. crude CLcv1 fell 1.26% to $61.34 per barrel. O/R
Emerging market stocks lost 2.47%. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 2.03% lower, while Japan's Nikkei .N225 lost 0.93%.
In China the Shanghai Composite .SSEC closed down 1.5% after hitting its lowest since late February.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ US-China trade: monthly figures
https://tmsnrt.rs/2WrYj0m Trade tensions are costing stocks some of their spring
https://tmsnrt.rs/2Wy7mwR
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