* MSCI ex-Japan down 0.1 pct, Nikkei down 0.3 pct, Kospi down 0.4 pct
* U.S. 10-year yield rises on strong retail sales
* North Korea cancels South Korea talks, weighing on sentiment
By Andrew Galbraith
SHANGHAI, May 16 (Reuters) - Asian markets fell in early trade on Wednesday after Pyongyang called off talks with Seoul, throwing a major U.S.-North Korean summit into question, and a spike in the U.S. 10-year Treasury yield to a seven-year high knocked sentiment on Wall Street.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1 percent.
Strong U.S. retail and factory data on Tuesday pushed the U.S. 10-year yield through a key level to hit 3.095, its highest since July 2011. The rise in yields hurt U.S. share markets on concerns it would undercut stock valuations.
Asian shares are under pressure after North Korea cancelled high-level talks with Seoul, denouncing military exercises between South Korea and the United States, breaking from several months of easing relations on the peninsula.
This has also raised concerns about the planned summit between U.S. President Donald Trump and his North Korean counterpart leader Kim Jong Un scheduled next month
“This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently,” JPMorgan analysts wrote in a note. “The broader risk for the region if talks do break down is that Trump no longer feels the need to keep China on side and could escalate trade tensions again.”
South Korea’s KOSPI was 0.4 percent lower, Japan’s Nikkei was down 0.3 percent and Australian stocks edged up 0.1 percent.
New Zealand’s S&P/NZX 50 index was down around 1.4 percent after earlier falling as much as 2.3 percent, after dairy company A2 Milk Ltd’s revenue guidance fell short of analyst expectations, knocking the shares to a three-month low.
In the United States, stronger growth and the potential for steadily rising inflation have added to expectations the U.S. Federal Reserve may move to increase interest rates at a faster pace.
The 10-year yield was last at 3.0686 percent.
The two-year yield, which rises with traders’ expectations of higher Fed fund rates, hit 2.5890 percent on Tuesday, its highest level since August 2008, and was last at 2.5766 percent.
On Wall Street, the Dow Jones Industrial Average fell 193.00 points, or 0.78 percent, to 24,706.41, the S&P 500 lost 18.68 points, or 0.68 percent, to 2,711.45 and the Nasdaq Composite dropped 59.69 points, or 0.81 percent, to 7,351.63.
In energy markets, crude oil prices remained near recent highs amid concerns U.S. sanctions on Iran may restrict crude exports from a major producer.
U.S. light crude was 0.6 percent lower at $70.92 after reaching $71.92 on Tuesday, its highest level since November 2014.
Brent crude oil settled at $78.43 a barrel, up 20 cents, or 0.3 percent. It earlier reached an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014.
The dollar was mostly flat against the yen at 110.29 .
The US dollar index, which tracks the greenback against a basket of six major rivals, was up 0.05 percent at 93.270. On Tuesday, the index had hit its highest level this year, lifted by the 10-year yield.
In commodities markets, gold was slightly higher, with spot gold trading at $1293.11 per ounce. (Reporting by Andrew Galbraith, additional reporting by Swati Pandey in SYDNEY; Editing by Sam Holmes)