LONDON- A seven-year high for oil prices pushed benchmark German Bund yields to the brink of positive territory on Tuesday, lifted U.S. Treasuries to pre-COVID levels and left global share markets trudging lower.

A 1.2% early fall for Europe's STOXX 600 and U.S. futures , as well as overnight drops in Asia where China had eased policy, kept MSCI's index of world shares on course for its worst January since 2016.

Tech stocks .SX8P , which have become highly sensitive to rising borrow costs, were down 1.5% as investors increasingly price in as many as four U.S. Fed hikes this year and even one from the European Central Bank.

Two-year U.S. yields , which track short-term Fed expectations, crossed 1% for the first time since February, 2020. The 10-year was up at 1.84% and Europe's benchmark German Bund was testing zero again at -0.08%.

"With pressure via U.S. Treasuries resuming this morning, the market remains vulnerable, and Bunds look set to test the 0% yield before long," Commerzbank analysts said.

Oil stocks .SXEP were the only ones in positive territory, jumping 0.4% as Brent crude prices topped $88 a barrel - their highest in more than seven years - after Yemen's Houthi group attacked the United Arab Emirates. O/R

It escalated hostilities between the Iran-aligned group and a Saudi Arabian-led coalition. After launching drone and missile strikes which set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to "respond to these terrorist attacks".

"If current geopolitical tensions continue and OPEC+ members can’t deliver on their 400,000 barrel per day increase, macros coupled with the strong technical outlook could see prices push toward the $100 mark," CMC Markets' analyst Ash Glover said.

Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan had edged higher early in the session, before turning and finishing down 0.5% in the afternoon.

China's blue chip CSI300 Index bucked the trend to stand 0.7% higher after difficult days for its troubled property firms.

On Monday, the People's Bank of China unexpectedly cut borrowing costs on its medium-term loans for the first time since April, 2020.

Its vice governor Liu Guoqiang said the central bank will roll out more support.

"We should hurry up, make our operations forward-looking, move ahead of the market curve," he told a news conference on Tuesday.


In currency markets, the dollar index, which tracks the greenback against a basket of currencies of major trading partners, was up at 95.33, while China's yuan hit a 3-1/2 year high. /FRX

Japan's yen fell after the Bank of Japan said it would stick to its ultra-loose monetary policy, despite hopes the economy is finally kicking clear of deflation.

Gold was slightly lower at $1,817.1642 per ounce and in emerging markets Russia and Ukraine stabilised after fears of another Russian military foray into Ukraine had sparked a heavy selloff in recent days. 

Russia's rouble, highly volatile recently, firmed 0.4% to 76.2 a dollar after reports the West was no longer considering cutting Russian banks off from the Swift global payments system and was instead eyeing sanctions on banks. 

Russian bonds , steadied near their March, 2020 lows, while the premium to hold Ukraine bonds over safe-haven U.S. Treasuries also narrowed fractionally having surged past 1,000 basis points, a level generally regarded as distressed, on Monday.

(Additional reporting by Scott Murdoch in Melbourne, editing by Ed Osmond) ((; +44 (0)20 7513 4042; Reuters Messaging: Twitter @marcjonesrtrs))