GLOBAL MARKETS-Stocks fall, dollar struggles as Trump's Greenland gambit rattles markets

By Ankur Banerjee

SINGAPORE, Jan 20 (Reuters) - Stocks slid on Tuesday, the dollar fell for a second straight day and U.S. Treasury yields climbed to four-month highs after U.S. President Donald Trump intensified his push to take control of Greenland.

Trump's threat of additional tariffs on European nations if a deal on Greenland is not reached has revived talk of the 'Sell America' trade that emerged in the aftermath of his sweeping "Liberation Day" levies last April, where investors sell U.S. stocks, dollar and Treasuries.

That trade appeared to be gathering momentum in Asian hours on Tuesday. Investors were also scurrying for safe-haven assets including the Swiss franc CHF= and gold XAU=.

Nasdaq NQc1 and S&P 500 futures EScv1 slid over 1%, while the dollar =USD was broadly weaker and the yield on the 10-year U.S. Treasury note rose to 4.265%, its highest level since early September. US/ FRX/

European futures STXEc1 were 0.27% lower, pointing to another subdued open after the pan-European STOXX 600 .STOXX fell 1.2% on Monday.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.24%, inching further away from the record highs it hit last week.

Kyle Rodda, senior market analyst at Capital.com, said there's hope that the escalating tensions will be self-limiting "if the markets send a signal that his actions are bad for investors and the economy."

"But there's the risk that's not the case and we are heading for a potentially disruptive standoff between the U.S. and EU."

All eyes will now be on Davos where Trump said the United States would talk about acquiring Greenland.

Trump's threats have triggered a sharp pushback in Europe and raised questions on the outlook of trade deals struck since then with Europe.

"Even if there is de-escalation this episode will still cause many to doubt the credibility of any deal with Trump and so tariff uncertainty will remain elevated," MUFG's Europe economist Henry Cook said.

Citi downgraded European equities to 'neutral' from 'overweight' on the latest step-up in tensions and tariff uncertainty.

The dollar hogged the spotlight in currency markets. The dollar index =USD, which measures the U.S. currency against six units, was 0.18% lower at 98.912. The Swiss franc hit a one-week high of 0.7956 per dollar after rising 0.7% on Monday.

JAPAN BONDS SELLOFF

Japan's Nikkei .N225 fell 0.8% and the yen JPY= was last flat at 158.08 per dollar as investors looked ahead to next month's election with Prime Minister Sanae Takaichi seeking voter backing for increased spending and tax cuts.

But the main action was in the bond market where a selloff across the curve pushed short- and long-term Japanese government bond (JGB) yields to record highs on concerns the tax cuts, also touted by opposition groups, will worsen the government's already strained finances.

Investors have been fretting about Japan's fiscal health since Takaichi, a fiscal dove, took over as PM in October.

Demand fell at an auction of 20-year Japanese government bonds (JGBs) JP20YTN=JBTC and yields on the notes touched a record high 3.35% on Tuesday.

"Soft demand at the 20-year JGB auction is the market asking for a bigger 'fiscal premium'," said Charu Chanana, chief investment strategist at Saxo in Singapore.

"That's why the long end is leading yields higher and steepening the curve, it’s not a growth boom story, it’s debt/supply plus political uncertainty getting priced in."

In commodities, gold XAU= climbed above $4,700 per ounce, hitting yet another record high and taking its gains for the month to over 9%. GOL/