* MSCI Asia-Pacific index down 0.35 pct, Nikkei sheds 0.2 pct
* Tech shares retreat broadly on latest US-China row
* Dollar sags as US yields decline amid risk aversion
* Libyan export woes lift oil after previous day’s big fall
By Shinichi Saoshiro
TOKYO, June 26 (Reuters) - World stocks extended a sell-off on Tuesday as an escalating trade fight between the United States and other major economies steered investors away from riskier assets, with markets in China bearing the brunt of investor anxiety.
The tense backdrop lifted safe-haven U.S. Treasuries and kept the dollar on the defensive as financial markets worried about the wider global economic fallout of the Trump administration’s “America First’ agenda.
Asian equities were bathed in a sea of red after Wall Street tumbled overnight, with the S&P 500 and Nasdaq suffering their steepest losses in more than two months overnight.
Markets in China - the epicentre of the trade tensions with the United States - took the biggest knock.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.35 percent.
Hong Kong’s Hang Seng retreated 0.4 percent, the Shanghai Composite Index slid 0.8 percent and Japan’s Nikkei shed 0.2 percent.
Equities from tech-heavy regions such as South Korea’s KOSPI and Taiwan fell 0.9 percent and 0.75 percent, respectively.
Taiwan Semiconductor Manufacturing Co was down 1.8 percent, South Korean chipmaker SK Hynix Inc lost 1.55 percent and Japan’s Tokyo Electron was down 1.45 percent. Chinese tech giant Tencent Holdings tumbled 1.7 percent.
Asian tech shares slid after their U.S. peers which derive much of their revenue from China took a battering overnight.
Sparking the drop in tech shares and souring broader sentiment was a report on Monday that the U.S. Treasury Department was drafting curbs that would block companies with at least 25 percent Chinese ownership from buying U.S. tech firms.
“Unlike the seemingly spur-of-the-moment tweets by President Trump and retaliatory exchange of tariffs, Washington’s bid to protect intellectual property is an issue at the heart of a trade row between two powers battling for future global supremacy,” wrote Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo.
Besides the trade spat with China, the United States has recently upped the ante in a challenge to the European Union by threatening to impose tariffs on cars imported from the bloc.
“Increasingly hawkish trade rhetoric the United States is employing could begin impacting the economy by cooling investor sentiment and curbing capital expenditure by corporations,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
“It’s turning out to be a long-term bearish factor for the financial markets, as the United States is unlikely to back down at least through its midterm elections.”
The dollar index against a basket of six major currencies dipped 0.1 percent to 94.193 and headed for its fifth straight day of losses.
The greenback was pressured as long-term U.S. Treasury yields declined to one-week lows amid the heightened risk aversion in financial markets.
The euro added to the previous day’s gains and reached a near two-week high of $1.1722.
The dollar was down 0.3 percent at 109.450 yen, having fallen to a two-week low of 109.365 on Monday. The yen often attracts bids in times of political tensions and market turmoil.
Brent crude oil futures were up 0.07 percent at $74.78 on the back of uncertainty over Libyan exports. The contracts had slid 1 percent overnight as receding investor risk appetite weighed on commodities.
Oil prices were capped after OPEC and its allies on Friday agreed to increase global supplies, albeit modestly.
Trade concerns kept copper on the London Metal Exchange near a 2-1/2-month low of $6,702.5 per tonne brushed on Monday. Spot gold shed 0.1 percent to $1,263.56 an ounce. (Reporting by Shinichi Saoshiro Editing by Shri Navaratnam)