Stocks slump with bond yields as Trump pushes ahead with tariffs

By Kevin Buckland

TOKYO, March 4 (Reuters) - Stocks slumped and bond yields slid on Tuesday in Asia as investors braced for an imminent escalation in a global trade war with new US tariffs on Canada, Mexico and China set to go into effect within hours.

The US dollar remained depressed, with sterling holding close to a 1 1/2-month high and the euro also firm as European leaders drew up a Ukraine peace plan to present to Washington.

Crude oil wallowed near 12-week lows, and bitcoin languished around $86,000 after erasing the surge to the cusp of $95,000 that started the week.

Tech stocks suffered particular selling pressure, pushing Japan's Nikkei down 2.2% and Taiwan's benchmark down 1.3%.

Hong Kong's Hang Seng  fell 1.8%, with a subindex of tech shares tumbling 2.9%. Mainland blue chips lost 0.7%.

Asian equities tracked the biggest losses on Wall Street this year from overnight, with the S&P 500 sliding 1.8% and the tech-heavy Nasdaq dropping 2.6%.

However, US futures pointed about 0.1% higher, signalling the sell-off may peter out later in the global day.

Europe looked headed for a lower open though, with STOXX 50 futures sliding 1%.

Investors turned sharply more risk averse after US President Donald Trump said 25% tariffs on Canada and Mexico will go into effect from 0501 GMT on Tuesday, along with a doubling of China levies to 20%.

The Canadian dollar and Mexican peso tumbled, although China's yuan bounced off its lowest level since February 13 in offshore trading.

Investors were also concerned on the fallout for the US economy as well, particularly amid a run of soft data in recent weeks.

Those worries escalated on Monday with figures showing factory gate prices jumped to a nearly three-year high and materials deliveries were taking longer, suggesting that tariffs on imports could soon hamper production.

Many investors and analysts remained optimistic though in the medium term.

"I assume tariffs are going into effect, but they will not remain in effect," said Tim Holland, chief investment officer at Orion.

"Some agreements will be reached around border security and some of the other issues the (Trump) administration has raised," he said. Until then, "we will have to live with the volatility and uncertainty tied to political risk, and trade in particular."

U.S. Treasury yields extended declines in Asian hours on Tuesday, with the 10-year yield dropping to the lowest since October at 4.115%.

The U.S. dollar index edged to the lowest since February 26 at 106.45.

The euro was steady at $1.0490 after a 1.1% rally on Monday. Sterling was stable at $1.2705 after a 1% advance.

The dollar dropped 0.5% to 148.71 yen.

However, it advanced 0.3% to 20.75 Mexican pesos, extending Monday's 0.8% rise. The U.S. currency edged up 0.1% to C$1.4489, after jumping to a one-month peak of C$1.4542 in the previous session.

The yuan was up about 0.2% at 7.2927 per dollar after weakening as far as 7.3078 on Monday.

Bitcoin changed hands at $85,468 as optimism about a strategic U.S. cryptocurrency reserve quickly waned, a day after Trump reignited hopes with a post on social media naming five tokens, including bitcoin, to be part of the plan.

Gold ticked down 0.2% to $2,888 per ounce.

Crude oil extended declines from Monday, when both Brent and WTI fell about 2% each to settle at the lowest levels since early December amid reports OPEC+ will proceed with a planned oil output increase in April.

Brent futures fell 0.7% to $71.15 a barrel, while U.S. West Texas Intermediate crude futures fell 0.4% to $68.09 a barrel.

(Reporting by Kevin Buckland; Editing by Sonali Paul)