* Ex-Japan Asia down 0.8 pct, China shares hit again
* Trade worries keep companies, investors cautious
* Global bond yields up on higher U.S. borrowing, BOJ
By Hideyuki Sano
TOKYO, Aug 2 (Reuters) - Asian stocks dropped on Thursday as the latest escalation in the Sino-U.S. trade war hit Chinese shares, while global bond markets were rattled by increased borrowing by Washington and Japan's new tolerance for higher yields.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.8 percent, dragged down by a 1.2 percent fall in Chinese H-shares .MICN00000PUS . Japan's Nikkei .N225 declined 0.4 percent.
The CSI 300 index .CSI300 of China's A-shares dropped 1.4 percent to three-week lows, extending falls from a July 24 high to 5.5 percent.
The U.S. administration on Wednesday increased pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports. it had not been for the sideswipe on trade, markets would have been in much better shape this week. Apple's earnings were super, helping to quell concerns about high-tech companies," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
"The BOJ's policy tweaks weren't much of a tightening, and did little damage," he added.
MSCI's gauge of stocks across the globe .MIWD00000PUS is down 0.45 percent so far this week, reversing gains from the previous four weeks, with Chinese shares accounting for the bulk of that.
On Wall Street, the S&P 500 .SPX lost 0.10 percent on Wednesday, but the Nasdaq Composite .IXIC added 0.46 percent to extend its recovery from Monday's three-week low.
While industrial stocks .SPLRCI fell 1.3 percent on trade worries, technology shares .SPLRCT were boosted by strong earnings from Apple AAPL.O .
The world's largest company by market capitalisation rose 5.9 percent, boosting its value to close to $1 trillion.
The Federal Reserve kept interest rates unchanged on Wednesday, as expected, characterising the U.S. economy as strong and staying on track to increase borrowing costs in September and likely again in December. that surprised nobody, U.S. bond yields rose, with the benchmark 10-year yields breaking above 3 percent to 2-1/2-month highs, after the U.S. Treasury said it would boost borrowing in the bond market in the coming quarter. GRIP
Global bond markets were also rattled by sharp rises in Japanese bond yields since the Bank of Japan loosened its grip on long-term yields on Tuesday.
The 10-year Japanese government bond yield rose to a 1-1/2-year high of 0.145 percent JP10YTN=JBTC on Thursday.
Worries that higher yields in Japan may prompt Japanese investors to repatriate funds hit European bonds, boosting German DE10YT=TWEB and French FR10YT=TWEB yields to seven-week highs on Wednesday.
In the foreign exchange market, major currencies were little moved.
The euro changed hands at $1.1661 EUR= , while the yen stood at 111.67 yen to the dollar JPY= .
The British pound was steady at $1.3119 GBP=D3 ahead of an expected rate hike by the Bank of England later in the day.
Oil prices climbed a tad after two days of heavy losses on a surprise increase in U.S. crude stockpiles.
Brent crude futures LCOc1 rose 0.5 percent to $72.78 per barrel after a 2.5 percent fall the previous day.
U.S. West Texas Intermediate (WTI) crude futures CLc1 edged up 0.4 percent to $67.96 a barrel after Wednesday's 1.6 percent fall.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC: MSCI, Nikkei datastream
http://reut.rs/2sSBRiD
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>