LONDON/HONG KONG  - Global shares stumbled on Tuesday, rattled by concerns over China's regulations for its once-freewheeling internet sector and a worldwide spike in COVID-19 infections driven by the Delta variant.

U.S. Treasury and German bond yields fell to the lowest in over a week ahead of the release of U.S. retail sales data due later in the day, expected to offer further signs of slowing economic momentum.

In early European trade, the pan-European STOXX 600 shed 0.5%, its lowest level in more than a week and its second straight session of falls after its longest winning streak in over a decade.

U.S. stock futures, the S&P 500 e-minis, were down 0.5%.

Chinese regulators issued draft rules on Tuesday for the internet sector, banning unfair competition and restricting the use of user data, the latest move in a crackdown on the country's powerful tech companies. 

The tech index in Hong Kong, where several of China's biggest internet giants are listed, fell 3.3%, while internet giants Tencent, Alibaba and Meituan dropped by 4.3%, 4.6%, and 3.4%, respectively.

"Evolving government policy initiatives are weighing on sentiment and causing some uncertainty. That said, regulation is a constant in China," said Catherine Yeung, investment director at Fidelity International.

"Investors must accept and incorporate this into their risk-reward frameworks and factor it into the assessment of the long-term business prospects for companies."

MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.5% and China's blue-chip CSI300 index dipped 2.1%.

Amid signs that the world's economic recovery is losing momentum, the continued spread of new COVID-19 variants and the impact on the global economy have also shaken market confidence.

New Zealand's dollar slumped to a near three-week low after the country was placed under strict lockdown following the first reported case of the coronavirus in six months. 

The currency was down 1.4% at $0.6921, on track for its biggest daily fall since May.

Investors globally were also monitoring turmoil in Afghanistan, where thousands of civilians desperate to flee the country thronged Kabul airport after the Taliban seized the capital and declared the war against foreign and local forces over. Markets, however, have not reacted strongly so far. 

A raft of Chinese data on Monday showed a surprisingly sharp slowdown in the world's second-largest economy, while the New York Federal Reserve's Empire State barometer of manufacturing business activity fell more than expected. 

"Entering the second half of 2021, we think the investor concern is shifting from inflation to growth globally," said Wang Qi, CEO at MegaTrust Investment. "Inflation is still our top concern, but we are also worried about a potential economic slowdown."

The market consequences of the chaos in Afghanistan for the developed world had been limited so far, Deutsche Bank analysts said in a note.

"Instead, the longer-term risk is that Afghanistan could become a haven for terrorist groups, and such attacks have historically had serious market ramifications of their own," they noted.

The other risk of the conflict was that it complicated U.S. President Joe Biden's push to pass economic proposals, alongside the potential for another fight over the debt ceiling in the weeks ahead, Deutsche Bank said.

Investors are focused on when the Federal Reserve will rein in its easy money policies, with minutes from the central bank's latest meeting due on Wednesday.

Boston Federal Reserve Bank President Eric Rosengren said on Monday that one more month of strong job gains could satisfy the U.S. central bank's requirements for beginning to reduce its monthly asset purchases. 

The U.S. dollar was up 0.1% at 92.705, after gaining in the previous session.

The Australian dollar fell to a nine-month low after the latest central bank meeting minutes showed policymakers would be prepared to take policy action should coronavirus lockdowns threaten a deeper economic setback. The currency was last down 0.7% on the day at $0.72885.

In more risk-off moves, the yield on benchmark 10-year Treasury notes fell as demand for safe-haven U.S. bonds ticked up. The yield on benchmark 10-year Treasury notes dropped to 1.25% compared with its U.S. close of 1.257% on Monday.

Germany's 10-year yield, the benchmark for the bloc, fell nearly 3 basis points to -0.496% in early trade, the lowest since Aug. 6.

U.S. crude dipped 0.6% to $66.9 a barrel. Brent crude fell 0.6% to $69.1 per barrel.

Gold was 0.2% higher. Spot gold traded at $1,791.41 per ounce.

(Editing by Richard Pullin, Jacqueline Wong and Susan Fenton) ((tom.arnold@thomsonreuters.com;))