GLOBAL MARKETS-Asia stocks sag, bonds rally as trade war fears persist

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* MSCI Asia-Pacific index near 4-month low, Nikkei sheds
0.5%
* Weak market sentiment supports dollar
* Risk aversion drives 10-yr German bond yield near record
low
* Oil bounces modestly from near 3-month lows

By Shinichi Saoshiro
TOKYO, May 30 (Reuters) - Asian stocks tracked Wall Street
losses on Thursday as rhetoric from Beijing and Washington over
trade matters kept alive investor concerns about the tariff
war's impact on global economic growth.
The risk aversion propped up global safe-haven assets such
as government bonds, with yields on German benchmark debt
approaching record lows.
The dispute between the world's two largest economies showed
few signs of abating, with Chinese newspapers reporting that
Beijing could use rare earths to strike back at Washington after
U.S. President Donald Trump remarked he was "not yet ready" to
make a deal with China over trade. Japan's Nikkei .N225 was down 0.5% and Australian stocks
.AXJO shed 0.66%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS stood little changed after slipping to a
four-month low the previous day.
"The equity markets are in the midst of pricing in a
long-term trade war, with participants shaping their portfolios
in anticipation of a protracted conflict," said Soichiro Monji,
senior strategist at Sumitomo Mitsui DS Asset Management.
"The upcoming G20 summit could provide the markets with
relief, as the United States and China could use the event to
begin negotiating again over trade."
The G20 meeting is set for June 28-29 in Japan.
Amid the flight-to-safety Germany's 10-year bond yield
DE10YT=RR fell to a three-year trough of minus 0.179%
overnight. A drop below minus 0.200% set in 2016 would take the
yield to a record low.
Spanish and Portuguese 10-year yields fell to record lows as
deeply negative German Bund yields have encouraged investors to
look elsewhere for returns. GVD/EUR
Elsewhere, the 10-year U.S. Treasury yield US10YT=RR stood
at 2.267% after falling to a 20-month low of 2.210% on
Wednesday.
Lower Treasury yields not withstanding, the dollar index
against a basket of six major currencies .DXY was steady at
98.139 following two straight days of gains, with the greenback
serving as a safe haven.
The euro was a shade higher at $1.1141 EUR= , pulling back
slightly following three successive days of losses.
The dollar was little changed at 109.615 yen JPY= after
bouncing back from a two-week low of 109.150 brushed on
Wednesday.
Oil prices rose modestly following volatile trading on
Wednesday, when they fell to near three-month lows at one point
as trade war fears also gripped the commodity markets.
U.S. crude futures CLc1 were up 0.43% at $59.06 per barrel
after brushing $56.88 the previous day, their lowest since March
12.
Trade worries have weighed on oil but supply constraints
linked to the Organization of the Petroleum Exporting Countries'
output cuts and political tensions in the Middle East have
offered some support.

(Editing by Sam Holmes)