* Investors nervous ahead of U.S.-China trade talks
* Brexit tensions hit the pound
* Safe havens yen, gold shine in flight to safety
* Turkish lira struggles on tension over Syria
* Worries over health of world economy hit oil
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Karin Strohecker
LONDON, Oct 8 (Reuters) - European stocks sank and major
bond yields nudged lower on Tuesday as concerns over China-U.S.
trade talks, disappointing European company news and escalating
tensions between London and Brussels sparked a flight to safety.
The pan-European STOXX 600 index .STOXX snapped a two-day
winning streak to lose 1%. Germany's trade-sensitive DAX
.GDAXI declined 1.1%, with data showing an unexpected rise in
industrial output failing to lift the index. A drop in sterling over a fresh Brexit flare-up cushioned
Britain's FTSE .FTSE , which slipped just 0.3%.
The losses followed mixed messages on trade tensions, with
Washington blacklisting eight Chinese tech companies and
President Donald Trump suggested a deal to end the trade dispute
may not yet be quite in the offing.
On Monday, U.S. and Chinese deputy trade negotiators
launched two days of talks aimed at paving the way for the first
minister-level negotiations in months on Thursday and Friday.
"We have a lot of uncertainty still around – last night,
Trump said there would only be a deal if he really got his way,
the Chinese want to exclude all the disputed topics ... some are
cautiously optimistic, other are rather sceptical," said Antje
Praefcke at Commerzbank in Frankfurt.
"We expect that we could see a mini deal with neither
Beijing nor Washington interested in letting this escalate. But
for a real deal, the positions are too far apart."
Mixed corporate news added to the downbeat picture, with LSE
LSE.L shares tumbling 5% after Hong Kong pulled out of its
takeover bid for the exchange, while German biotech firm Qiagen
QIA.DE plunged 20% to three-year lows after a sales warning.
MSCI's All-Country World Index .MIWD00000PUS , which tracks
shares across 47 countries, slipped 0.1%.
Europe's losses followed healthy gains in Asia, where
Japan's Nikkei .N225 climbed 1.0% as MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.55%,
led by gains in tech shares in South Korea and Taiwan.
Hong Kong .HSI extended gains after the territory's leader
said she had no plans to use emergency regulation ordinance to
introduce other laws.
Chinese mainland stocks .SSEC returned from a week-long
holiday with a 0.6% rise. The National Holiday celebrations also
offered a rare respite to China's retail sector, with spending
on goods and dining returning to growth this year. Yet a private survey showed growth in China's services
sector at its slowest in seven months in September, offering
little momentum to an economy that has been expanding at its
weakest pace in almost three decades.
With the focus turning to trade talks, Trump also said he
hoped Beijing found a humane and peaceful resolution to
political protests in Hong Kong, and said that situation had the
potential to hurt the discussions.
An increase in U.S. tariffs on $250 billion worth of Chinese
goods, to 30% from 25%, is scheduled for Oct. 15. Trump has said
it will take effect if no progress is made in the negotiations.
"People are hoping Trump may postpone some of the upcoming
tariffs," said Yukino Yamada, senior strategist at Daiwa
Securities. "Nevertheless, you can't ignore that fact that, up
until now, the market has underestimated Trump's determination
on tariffs."
U.S. futures pointed to a 0.6% drop on open for Wall Street
ESc1 YMc1 . On Monday, the S&P 500 .SPX lost 0.45%, unable
to cling on to gains made after positive tweets and headlines
about the trade talks. MOMENTUM
The flight to safety also added to pressure in fixed income
markets with German bund DE10YT=RR yields nudging lower while
U.S. Treasuries US10YT=RR US2YT=RR eased ahead of some $78
billion in note and bond supply slated for auction this week.
Meanwhile in currencies the dollar lost momentum, dipping
0.1% against a basket of rivals .DXY after posting its biggest
single-day rise in a week in the previous session. The
safe-haven yen rose, with the dollar trading at 106.89 JPY= .
Markets will be keenly watching comments on Tuesday from
U.S. Federal Reserve Chairman Jerome Powell after weak data
raised concerns the U.S. economy may be heading towards a
protracted slowdown.
The euro EUR=EBS got a boost from the healthy German
industrial output data, rising 0.2% to $1.0983 though not far
off the more than a two-year low it hit last week.
Sterling tumbled to a one-month low against the euro after
reports that Brexit talks between Britain and Brussels were
close to breaking down.
Tempers flared as the EU accused Britain of playing a
"stupid blame game" after a Downing Street source said a deal
was essentially impossible because German Chancellor Angela
Merkel had made unacceptable demands. "Brexit is back with GBP underperforming other major
currencies as the battle lines between the UK and EU have
hardened further," Ned Rumpeltin, European head of FX Strategy
wrote in a note to clients.
The pound fell 0.5% to a one-week low of $1.2226, and
weakened more than 0.7% against the euro, touching a low of
89.93 pence - its weakest since Sept. 9. GBP/
In emerging currency markets the focus was on the lira,
which was treading water after hitting a five-week low in early
trade and a more than 2% tumble on Monday over concerns about a
planned Turkish military incursion in northern Syria.
Trump threatened to destroy Turkey's economy if Ankara took
those moves too far, after the U.S. leader opened that door by
withdrawing U.S. troop from the area. Worries over the health of the global economy sent oil
prices 1.4% lower. Brent crude LCOc1 futures stood at $57.5483
a barrel while U.S. West Texas Intermediate (WTI) CLc1 traded
at $51.99. O/R