* Wall Street decline steepens, USTR comments add to trade angst
* U.S. Treasury yields down, dollar index gains
* Oil falls (Updates to late afternoon)
By Sinéad Carew
NEW YORK, May 7 (Reuters) - Concerns over relations between the United States and China slammed global equity markets, oil futures and U.S. Treasury yields on Tuesday as investors fretted about setbacks in trade talks between the world’s two biggest economies.
U.S. equities deepened their losses as the session wore on as investors bet that U.S. President Donald Trump’s weekend threat to hike tariffs on hundreds of billions of dollars of Chinese goods could actually materialize at the end of the week.
U.S. Trade Representative Robert Lighthizer on Monday vowed to continue talks but said that as of now “come Friday there will be tariffs in place.”
While investors initially gave Trump the benefit of the doubt on views the tariff threats were a strong negotiating tactic, Michael Antonelli, market strategist at Robert W. Baird in Milwaukee, said they were less convinced after Lighthizer’s comment.
“The reason the market is so scared today is because the notion it was a negotiating tactic is beginning to fade away,” he said. “On days like today buyers disappear and any little mini rally gets decimated. Nobody wants to get in front of an out of control car today.”
The Dow Jones Industrial Average fell 599.44 points, or 2.27%, to 25,839.04, the S&P 500 lost 64.38 points, or 2.20%, to 2,868.09 and the Nasdaq Composite dropped 212.75 points, or 2.62%, to 7,910.54.
The S&P is on track for its second biggest percentage drop this year. Last time had bigger drop was Jan. 3.
MSCI’s gauge of stocks across the globe shed 1.23%, while the pan-European STOXX 600 index lost 1.37%.
“The issue is to sit down and make more progress on this. Right now it feels like we’re at a place where things are getting worse, not better, in terms of getting a deal done,” said Art Hogan, chief market strategist at National Securities in New York.
U.S. Treasury yields were lower as investors turned to fixed income for safety. By late afternoon the spread between U.S. short-dated and long-dated Treasury yields narrowed further as longer-dated yields fell to five-week lows.
Benchmark 10-year notes last rose 15/32 in price to yield 2.4477%, from 2.5% late on Monday.
The U.S. dollar rose and the Chinese offshore yuan remained hobbled near 2-1/2 month lows as the U.S.-China uncertainty rattled traders, though both moves were modest.
The dollar index, tracking the greenback against six major peers, rose 0.15%, with the euro down 0.1% to $1.1186.
The offshore yuan was last down 0.45% at 6.802 yuan per dollar.
The Japanese yen strengthened 0.52% versus the greenback at 110.21 per dollar.
Oil prices fell on worries U.S.-China tariffs would hurt global growth and expectations that U.S. crude stockpiles could hit 19-month highs also weighed.
U.S. crude fell 1.46% to $61.34 per barrel.
Emerging market stocks lost 0.75%.
Additional reporting by Kate Duguid, Richard Leong and Scott DiSavino in New York, Marc Jones and Tom Arnold in London Editing by Bernadette Baum and Dan Grebler