CANADA FX DEBT-C$ weakens as investors fret about U.S.-China trade talks

    * Canadian dollar falls 0.1% against the greenback
    * Price of U.S. oil falls decreases 1.4%
    * Canadian bond prices rise across a flatter yield curve
    * Gap between 2- and 10-year yields hits narrowest in five

    TORONTO, May 7 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday as investors worried
that trade negotiations between the United States and China were
unraveling, which could hurt the global economy.          
    Global stocks added to this week's losses after U.S.
President Donald Trump in a surprise move on Sunday threatened
to hike tariffs on Chinese goods this week. U.S. officials have
said China has backtracked on substantial commitments made
during months of negotiations.             
    Canada runs a current account deficit and exports many
commodities, including oil, so its economy could suffer if the
global flow of capital or trade slows.
    U.S. crude oil futures        were down 1.4% at $61.41 a
    At 9:43 a.m. (1343 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3471 to the greenback, or 74.23 U.S.
cents. The currency traded in a range of 1.3410 to 1.3485.    
    On Monday, Bank of Canada Governor Stephen Poloz said it was
impossible to predict the consequences of an escalation in the
U.S.-China trade dispute. He also said the housing sector was
solid despite a series of challenges and called for a more
flexible mortgage market to help make the country's financial
system safer.             
    Canadian housing starts data for April is due on Wednesday,
while the April jobs report is due on Friday.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
           rose 4 Canadian cents to yield 1.600% and the 10-year
            climbed 30 Canadian cents to yield 1.704%.
    The gap between Canada's 2- and 10-year yields narrowed by
1.1 basis points to a spread of 10.4 basis points, its narrowest
since April 1.    

 (Reporting by Fergal Smith
Editing by Alistair Bell)