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New U.S. tariffs on Canada, Mexico, China come into force

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European stocks fall 1.3%

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Automakers, exposed to tariffs, slump over 4.3%

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Government bond yields down

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Tech shares sold as equities drop across Asia

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Oil extends retreat

By Tom Wilson

LONDON, March 4 (Reuters) - Stocks and bond yields slid

on Tuesday as investors globally ducked for cover after the

United States hit Canada, Mexico and China with steep tariffs,

launching new trade conflicts with the top three U.S. trading

partners.

European stocks fell 1.3%, losing ground from their

record highs, with tariff-sensitive automakers losing

4.3% and on track for their worst day since September 2022.

However, aerospace and defence stocks hit a record

high.

Government bond yields fell. U.S. 10-year Treasury yields

dropped to their lowest since October and were last

at 4.164%. Yields on German 10-year bonds, a benchmark for the

euro zone, also slid.

Other riskier assets lost ground too, with bitcoin slipping

under $84,000, erasing a surge at the start of the week. The

Australian dollar fell to a one-month low, while the Mexican

peso and Canadian dollar also weakened.

MSCI world equity index, which tracks shares

in 47 countries, fell 0.2%.

U.S. futures were flat, after gaining in European

trading hours almost 0.3%. The S&P 500 is down about 5%

from its February 19 all-time closing high as tariffs exacerbate

concerns about growth.

Investors were also unnerved by U.S. President Donald Trump

pausing military aid to Ukraine following his clash in the Oval

Office last Friday with Ukrainian President Volodymyr Zelenskiy.

"Everyone is caught by the onslaught. You have the news on

tariffs, the news on Ukraine," said Samy Chaar, chief economist

and chief investment officer for Switzerland at Lombard Odier, a

private bank in Geneva.

"It means that you create uncertainty, and when you have

that on markets, investors get back to base."

China swiftly retaliated against the tariffs, announcing on

Tuesday 10%-15% hikes to import levies covering $21 billion

worth of American agricultural and food products.

In Asia, equities tracked the biggest losses on Wall Street

this year from overnight. Japan's Nikkei fell 1.2% and

Taiwan's benchmark lost 0.7%.

Crude oil settled at the lowest levels since early December

amid reports OPEC+ will proceed with a planned oil output

increase in April. Brent futures fell 0.9% to $70.72 a

barrel.

U.S. FALLOUT?

Market players were concerned about the fallout for the U.S.

economy as well, especially given a run of soft data in recent

weeks.

Those worries escalated on Monday with figures showing U.S.

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.

Higher China tariffs "will likely hurt the U.S. itself as it

needs cheap Chinese products to bring down inflation," said Wang

Zhuo, partner of Shanghai Zhuozhu Investment Management.

"Higher tariffs on U.S. agriculture products will also

negatively impact China," Wang added.

China's yuan bounced off its lowest level since February 13

in offshore trading, with the People's Bank of China continuing

to guide the currency higher via the official fixing.

Some investors were sanguine about the tariffs.

"It's quite clear that China, and frankly all the other

governments, are trying to avoid (a trade war), but they can't

be seen to be weak, nor do they want to escalate," said Jason

Windsor, CEO of UK asset manager abrdn.

"I suspect concessions will be found and we'll find a

way through this."

The U.S. dollar index, which tracks the currency

against six peers, was last down 0.2%, around its lowest in

three months.

Sterling held close to a 1-1/2-month high and the

euro was also firm after a 1% rally on Monday.

Bitcoin fell below $84,000 as optimism about a

so-called strategic U.S. cryptocurrency reserve quickly waned.