* MSCI ex-Japan edges down 0.1 pct, Nikkei falls 0.4 pct
* U.S. 10-year yield rises on strong retail sales
* Dollar at 2018 high on yield advantage
* North Korea cancels South Korea talks, weighing on sentiment
* European shares seen starting flat to slightly higher
By Andrew Galbraith and Tomo Uetake
SHANGHAI/TOKYO, May 16 (Reuters) - Asian stock markets dipped on Wednesday after Pyongyang abruptly called off talks with Seoul, throwing a U.S.-North Korean summit into doubt, while surging bond yields revived worries about faster U.S. interest rate hikes that could curb global demand.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent as Pyongyang’s move appeared to mark a break in months of warming ties between North and South Korea and with Washington.
European shares looked set to open flat to marginally higher on Wednesday and U.S. S&P futures were little changed.
Financial spread-betters expect London’s FTSE to open 3 points higher at 7,725, Frankfurt’s DAX to open 19 points higher at 12,989 and Paris’ CAC to open unchanged at 5,533.
A cancellation of the June 12 summit in Singapore could see tensions on the Korean peninsula flare again as investors worry about China-U.S. trade tensions and the sustainability of global economic growth.
“This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently,” JPMorgan analysts wrote in a note.
“The broader risk for the region if talks do break down is that Trump no longer feels the need to keep China on side and could escalate trade tensions again.”
Strong U.S. retail sales and factory data on Tuesday pushed the U.S. 10-year yield through a key level to hit 3.095 percent, its highest since July 2011, raising worries about higher borrowing costs for companies worldwide.
The 10-year yield was last at 3.071 percent.
The rise in yields hurt U.S. share markets on concerns it would undercut stock valuations.
The Dow Jones Industrial Average fell 193.00 points, or 0.78 percent, to 24,706.41, the S&P 500 lost 18.68 points, or 0.68 percent, to 2,711.45 and the Nasdaq Composite dropped 59.69 points, or 0.81 percent, to 7,351.63.
Elsewhere in Asia, Japan’s Nikkei slid 0.4 percent, while South Korea’s KOSPI struggled for traction.
Stocks in China dipped 0.3 percent as traders awaited news from a second round of Sino-U.S. trade talks in Washington this week, with both sides believed to be still far apart. But Australian stocks bucked the trend and advanced 0.2 percent.
The strong U.S. data underpinned the dollar in currency markets.
The U.S. dollar index, which tracks the greenback against a basket of six major rivals, hit a 2018 high of 93.46 on Tuesday and last stood at 93.22.
The euro fell to as low as $1.1814, its lowest level in five months.
The dollar held firm at 110.24 yen having hit a near four-month high of 110.45 yen on Tuesday.
The yen largely shrugged off data that showed Japan’s economy shrank more than expected in the January-March quarter.
“U.S. retail data assured that the world is still in a synchronised global growth. If U.S. retail had been a disappointment, the market would have taken Japan’s GDP more negatively,” said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.
High-yielding Asian currencies were particularly vulnerable to higher U.S. yields, which could prompt investors to shift funds out of emerging markets.
The Indonesian rupiah hit a 2-1/2-year low while the Malaysian ringgit hit a four-month low.
The Indian rupee unexpectedly gained 0.5 percent on suspected currency market intervention by the central bank after hitting a 16-month closing low of 68.15 per dollar on Tuesday.
The South Korean won was steadier but the country’s bond yields rose to the highest level since late 2014.
Some market participants think emerging market assets would be better placed than they were in the past, when hints the U.S. Fed would taper its quantitative easing knocked their prices.
“What we see today is a reallocation to the U.S. because of a strong U.S. economy. I don’t expect panic selling in emerging markets for now,” said Daiwa’s Yamamoto.
He also said he does not see the U.S. 10-year yield rising further towards 3.5 percent given the Fed’s estimate of neutral U.S. interest rates is much lower.
San Francisco Federal Reserve President John Williams, who is about to assume a vice chairmanship as head of the New York Fed, said on Tuesday that the neutral rate remained around 2.5 percent.
In commodities markets, gold slightly rebounded after hitting a 4 1/2-month low the previous day on a strong dollar.
It stood at $1,294 per ounce, off Tuesday’s low of $1,289.30.
Crude oil prices remained near recent highs amid concerns U.S. sanctions on Iran may restrict crude exports from a major producer.
U.S. light crude was 0.4 percent lower at $71.06 after reaching $71.92 on Tuesday, its highest level since November 2014.
Brent crude oil traded at $78.21 a barrel, down 0.3 percent. On Tuesday, it reached an intraday peak of $79.47 a barrel, its highest since November 2014. (Reporting by Andrew Galbraith and Tomo Uetake, additional reporting by Swati Pandey in SYDNEY; Editing by Sam Holmes and Kim Coghill)