GLOBAL MARKETS-Widespread selloff hits stocks as Trump's threats over Greenland unnerve investors

By Chibuike Oguh and Elizabeth Howcroft

NEW YORK/PARIS, Jan 20 (Reuters) - A widespread selloff spread across equities on Wall Street, Europe and Asia on Tuesday following market volatility stirred by U.S. President Donald Trump's threats to reignite a trade war with Europe over Greenland.

Trump said he no longer thought "purely of peace" after he did not win the Nobel Peace Prize and reiterated a threat to increase tariffs on EU members Denmark, Finland, France, Germany, Sweden, and the Netherlands, along with Britain and Norway, until the U.S. is allowed to buy Greenland.

The threat reignited the "Sell America" trade that had emerged after Trump's "Liberation Day" levies announced last April.

EU leaders will discuss possible responses, including tariffs worth 93 billion euros ($109 billion) on U.S. imports, at an emergency summit in Brussels on Thursday.

"The geopolitical risks that we've been talking about for a long time are re-emerging and are shifting market perceptions of common alliances across allies in Europe," said Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey.

"That is coupled with what's going on in Japan with the JGB yields continuing to rise and the market caught asleep at the wheel on that risk that's out there. So it's all coming together for a pretty significant risk-off day."

The Dow Jones Industrial Average .DJI fell 1.76%, the S&P 500 .SPX fell 2.06% and the Nasdaq Composite .IXIC fell 2.39%. The indexes notched their biggest daily loss since October 10 while Wall Street's most-watched gauge of investor anxiety, the Cboe Volatility Index .VIX, jumped to an eight-week high of 20.99.

Europe's STOXX 600 fell 0.7% on the day, having already fallen 1.2% on Monday .STOXX, while the MSCI World Equity Index was down 1.39% .MIWD00000PUS. The FTSE 100 fell 0.67% .FTSE.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.55% lower, while Japan's Nikkei .N225 fell 1.11%. Japanese government bonds (JGBs) plunged, sending yields to record highs, after Prime Minister Sanae Takaichi's calling of a snap election shook confidence in the country's fiscal health.

"But we have to take all this with a grain of salt because what we've seen in prior times is that we get a risk-off and a selloff like this and the Trump administration and the powers that be walk things back and calm things down," Latif added.

U.S. Treasury Secretary Scott Bessent told reporters in Davos on Tuesday that he was confident the U.S. and European countries would find a solution over the Trump administration's aim to take over Greenland, brushing off "hysteria" about a possible trade war.

TARIFFS THREATENED ON FRENCH WINES AND CHAMPAGNE

Trump separately threatened to hit French wines and champagne with 200% tariffs, in an apparent effort to cajole French President Emmanuel Macron to join his Board of Peace initiative.

Amelie Derambure, senior multi-asset portfolio manager at Amundi in Paris, said that the downward move in markets was "precautionary profit-taking and some risk reduction," but that markets were helped by the macroeconomic backdrop.

The euro was up 0.65% against the dollar at $1.1721, having earlier hit its highest since January 2 EUR=. The Japanese yen JPY= strengthened 0.07% against the greenback to 158.18 per dollar. The dollar index was down 0.52% at 98.58 =USD and heading for its second day of declines.

U.S. Treasury yields rose in early trading to their highest since September. U.S. markets were closed on Monday for a public holiday, so the move was a delayed reaction to developments that began over the weekend.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 6.3 basis points to 4.295%. The yield curve between 2-year and 10-year U.S. Treasuries, and between 10-year and 30-year U.S. Treasuries, steepened by the most since October US2US10=RR, US10US30=RR.

The yield on the benchmark German 10-year Bunds DE10YT=RR fell 0.4 basis points to 2.858%.

Oil prices edged higher, with Brent crude futures settling up 1.53% at $64.92 a barrel LCOc1. U.S. West Texas Intermediate settled up 1.51% at $60.34 a barrel CLc1.

Gold hit a record high, rising above $4,700 an ounce XAU=. It was last up 1.89% at $4,757.78 an ounce.

Spot silver XAG= slipped 0.18% to $94.51 an ounce, after hitting a record $95.87.

($1 = 0.8535 euros)