GLOBAL MARKETS-Stock losses deepen as U.S. puts yuan in crosshairs

* MSCI Asia-Pacific index down 0.85%, Nikkei loses 1.2%
* Washington determines China a currency manipulator
* Yuan still weak but retreat stalls on firmer-than-expected
fix
* U.S. Treasury 10-year yield drops to lowest since Oct 2016
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Shinichi Saoshiro
TOKYO, Aug 6 (Reuters) - Global stocks extended already
substantial losses on Tuesday, after Washington designated
Beijing a currency manipulator and further rattled fragile
investor sentiment in a rapid escalation of the U.S.-China trade
war.
Safe-haven assets, including bonds and some currencies such
as the yen and Swiss franc, benefited as investors scurried to
avoid risk.
U.S. Treasury Secretary Steven Mnuchin said on Monday the
government had determined that China is manipulating its
currency, and that Washington would engage the International
Monetary Fund to eliminate unfair competition from Beijing.
"Officially labelling China a currency manipulator gives the
United States a legitimate reason to take even more steps," said
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ
Morgan Stanley Securities.
"The markets are now scrambling to factor in the possibility
of the United States imposing not only an additional 10% of
tariffs on Chinese imports, but the figure being raised to 25%.
This is likely to be a protracted trade war without a quick
resolution."
U.S. President Donald Trump vowed last week to impose a 10%
tariff on $300 billion of Chinese imports from Sept. 1, adding
that it can be raised beyond 25%. Some economists reckon the
global economy could slip into recession in the coming months if
the tariff is increased to 25%.
The Trump administration's dramatic move against China
hastened the risk aversion seen in global markets this week. On
Monday, China let the yuan slide in response to the latest U.S.
tariffs, which are expected to further aggravate trade tensions
between the world's two largest economies. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was down 0.85% after brushing its lowest since
January.
The Shanghai Composite Index .SSEC retreated 2.3%.
Japan's Nikkei .N225 shed 1.2%, Australian stocks .AXJO
fell 2.2% and South Korea's KOSPI .KS11 slid 0.3%.
"Hedge funds and other speculators who have bet on stocks
have not finished closing down their positions yet. There will
likely be another wave of selling in stocks," said Masanori
Takada, cross asset strategist at Nomura Securities.
"The sudden surge in volatility is likely to prompt risk
parity players to pull out possibly up to $20 billion from
global stocks and buy bonds."
S&P 500 futures ESc1 were down 0.65% in Asian trade. Wall
Street's major indexes posted their biggest percentage drop of
the year on Monday on concerns about the U.S.-China trade
war. .N
MSCI's All Country World Index .MIWD00000PUS , which tracks
shares in 47 countries, extended last week's slide and slumped
2.5% to a two-month low on Monday.
The Chinese yuan CNY= onshore fell to an 11-year low on
Tuesday, brushing 7.0699 per dollar.
In a symbolic move, Beijing let the yuan breach 7-per-dollar
on Monday for the first time since late 2008. But the Chinese
central bank's mid-point fixing on Tuesday of 6.9683 was firmer
than market expectations, and the yuan's retreat slowed.
China's offshore yuan stretched the previous day's slide,
and briefly weakened to 7.1382 CNH=D4 , the lowest since
international trading in the Chinese currency began in 2010. But
it pulled back to 7.0785 after Beijing's firmer-than-expected
yuan fixing on Tuesday.
The Japanese yen, a perceived safe-haven in times of market
turmoil and political tensions, touched a seven-month high of
105.520 per dollar JPY= before slipping back to 106.180.
The Swiss franc, another currency sought in times of
turmoil, has gained roughly 1% against the dollar this week. It
set a six-week peak of 0.9700 franc per dollar CHF= .
Investor demand for other safe-havens such government bonds
also remained high as risk aversion gathered momentum.
The 10-year U.S. Treasury yield US10YT=RR extended sharp
falls overnight and declined to 1.672%, its lowest since October
2016.
Japan's 10-year yield JP10YTN=JBTC fell to a three-year
trough of minus 0.215%.
Brent crude oil futures LCOc1 plumbed a seven-month low of
$59.07 per barrel as the trade war raised concerns about lower
demand for commodities. Brent last traded at $60.20 for a gain
of 0.65%.
Spot gold XAU= advanced to a six-year peak of $1,474.80 an
ounce as investors sought the safety of the precious metal.