* Dollar near 2-week highs on trade, EM selloff
* US-Canada trade talks to resume, deadline looms on China tariffs EM stocks fall 1.6 pct; EM FX index near 15-month low
* World stocks down for fourth day (Updates throughout, changes byline and dateline)
By Sujata Rao
LONDON, Sept 5 (Reuters) - A looming deadline in the U.S.-China trade conflict kept the dollar near two-week highs on Wednesday, inflicting fresh losses on emerging markets and sending world stocks lower for the fourth day in a row.
A public comment period on the possibility of fresh U.S. tariffs on another $200 billion of Chinese goods ends on Thursday, with expectations that the additional levies will be imposed by U.S. President Donald Trump.
The United States and Canada will also resume discussions on Wednesday on revamping the North American Free Trade Agreement (NAFTA). Ottawa is not expected to back down on key issues despite Trump’s threats to retaliate.
The dollar is benefiting from these uncertainties. But on Tuesday it also drew strength from upbeat U.S. indicators supporting the case for further interest rate hikes by the Federal Reserve — data showed U.S. manufacturing activity accelerating to more than a 14-year high in August.
Measured against a basket of currencies, the dollar inched 0.10 percent higher and stands around 1.5 percent off 14- month highs hit in August.
The greenback’s rise — up almost 8 percent since end-March — has sent emerging markets reeling, with MSCI’s emerging equity benchmark falling for the sixth day in a row and down 1.6 percent on the day while an index of emerging market currencies shed 0.4 percent to 15-month lows.
European shares retreated 0.7 percent to two-month lows , following weak closes in Asia, where expectations of U.S. tariffs sent Chinese shares down almost 1 percent .
“Until last month people were focusing on U.S. company earnings but now they are looking closely at what’s happening in emerging markets, at the trade war and the fact that the United States is likely to implement another wave of tariffs against China,” said Christoph Barraud, an economist at Paris-based brokerage Market Securities.
“If you look at global growth, more and more signs are that it will slow in coming months.”
The growth outlook fears, particularly for the developing world, were encapsulated by South Africa where data on Tuesday showed the economy slipping into recession for the first time since 2009. The rand has subsequently joined the Turkish lira and Argentine peso in a relentless sell-off, falling 1.5 percent and adding to the previous day’s 3 percent slump.
Argentina’s peso fell again on Tuesday, even though International Monetary Fund chief Christine Lagarde confirmed the IMF was working to improve a $50 billion standby finance deal for the country. The peso has shed more than half its value to the dollar this year, with Turkish lira a close second, having fallen more than 40 percent.
There were fresh signs of distress also in Indonesia, where the central bank continued to intervene to support the rupiah, which is at its lowest levels since the 1998 financial crisis.
“Rising U.S. rates, weak emerging market macro fundamentals and jittery geopolitics make for a poisonous concoction for EM assets,” analysts at Danske Bank said.
They also highlighted a geopolitical element to the sell-off, noting that Russia and Turkey at least had “seen their crises aggravated by geopolitical confrontation with the U.S.”.
The trade war fears are not sparing U.S. markets either, with equity futures indicating a weaker open on Wall Street . U.S. stocks weakened on Tuesday, with big drops in heavyweights such as Facebook and Nike.
All these concerns alongside the interest rate outlook mean the dollar’s safe-haven appeal is likely to remain intact. The greenback was at a near one-week high versus the yen while the euro slipped 0.2 percent following a loss of 0.35 percent on Tuesday.
“In a context where U.S. growth is still resilient, it supports a Fed rate hike in Sept and likely also in December,” Barraud said. “There is focus on the growth differential (between the United States and the rest of the world).”
One bright spot was Italy, where the mood has been lifted by signs the coalition government has abandoned plans for a spending binge that would have risked credit rating downgrades and put Rome on collision course with the European Union.
Italian stocks rose modestly, contrasting with declines elsewhere and sovereign borrowing costs fell — 10-year bond yields slipped under 3 percent for the first time in more than two weeks .
On commodity markets, oil prices fell, weighed down by the stronger dollar and as a tropical storm impacted U.S. Gulf coast production less than initially expected.
Reporting by Sujata Rao; Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Catherine Evans