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GLOBAL MARKETS-Relief rally fades fears of expanding trade wars

By David Randall

By David Randall

NEW YORK, July 2 (Reuters) - The global stocks rally that followed progress on U.S.-China trade relations stalled on Tuesday, pressured by weak manufacturing data from the euro zone and the United States, and as Washington threatened additional tariffs on European goods.

MSCI's All Country World Index, which tracks stocks in 47 countries, slipped 0.01%. Investors were discouraged by data showing factory activity in the euro zone shrank faster than expected last month and another report showing U.S. manufacturing activity slowed in June.

Also, the U.S. Trade Representative's office released a list of additional European products that could be subject to tariffs, on top of products worth $21 billion that were announced in April. These included olives, Italian cheese and Scotch whiskey.

Stocks had rallied globally on Monday after the United States postponed imposing more tariffs on Chinese products and the two countries agreed to continue negotiations.

"It's clear that the tariffs already in place will continue to take a toll on global and domestic growth, and with Trump now turning his attention on Europe, the early bullish bias seems to ease again," said Konstantinos Anthis, head of research at ADSS.

"The uncertainty about what could still come on trade causes confidence to fall and investors to hold back on their investment, which is a driver in markets today."

At the same time, investors are looking for positive economic data before they will push stocks higher, said Peter Cardillo, chief market economist at Spartan Capital Securities. The U.S. benchmark S&P 500 hit record intra-day highs Monday before paring its gains.

"While the threat of additional tariffs on EU imports is still an overhang for investors, the market is more likely taking a breather until new macro-economic data comes out,"

On Wall Street, the Dow Jones Industrial Average fell 54.81 points, or 0.21%, to 26,662.62, the S&P 500 lost 1.96 points, or 0.07%, to 2,962.37 and the Nasdaq Composite dropped 13.31 points, or 0.16%, to 8,077.85.

The pan-European STOXX 600 index rose 0.3% following modest gains in Asian equities.

The dollar index, which tracks the dollar against major rivals, was 0.1% lower at 96.749.

In debt markets, Italian government bonds rallied after Italy cut its 2019 budget deficit target to avoid European Union disciplinary action, potentially easing another major concern for markets.

Benchmark 10-year notes last rose 5/32 in price to yield 2.0153%, from 2.033% late on Monday.

Oil prices slipped as concerns that the global economy could be slowing outweighed an agreement by producer club OPEC on Monday to extend supply cuts until next March.

Brent crude fell 0.34% to $64.84 per barrel. U.S. crude fell 0.3% to $58.92 a barrel.

(Reporting by David Randall; Editing by David Gregorio)