GLOBAL MARKETS-Stocks soured by Wall Street sell-off and 'vaccine nationalism'

* Asian stock markets : https://tmsnrt.rs/2zpUAr4

* Easyjet highlights pain of airlines during lockdown

* Talk of distressed selling by hedge funds as shorts
squeezed

* Dollar gets safe-haven bid as euro backtracks

By Huw Jones

LONDON, Jan 28 (Reuters) - Shares wiped out their gains in
Europe for the year early on Thursday, soured by a sell-off on
Wall Street, no end in sight to pandemic lockdowns and a squeeze
in short positions.

The pan-European STOXX benchmark was down 1.8% at
395.77 points, its lowest since December. London, Paris
and Frankfurt all fell.

"The initial optimism of early this year is starting to
dissipate because of the prospects of tighter pandemic
restrictions for longer, and concerns over 'vaccine
nationalism'," said Michael Hewson, chief market analyst at CMC
Markets.

The European Union, locked in a public spat with vaccine
producer AstraZeneca, wants a shortfall in the company's
supplies to the bloc topped up from production in Britain.

Easyjet shares fell 2.3% after the airline warned it
would fly no more than 10% of 2019's capacity, highlighting the
plight of sectors hit by lengthy lockdowns.

The move by investors into "reflation" trades at the start
of the year on then-brighter growth prospects now looked
premature, analysts said.

"Amid concerns about the speed of vaccine distribution and
the COVID-19 impact on economic growth recovery, cyclical credit
looks most likely to underperform," UniCredit analysts said.

Wall Street on Wednesday suffered its biggest one-day
percentage drop in three months as the S&P500 index and Nasdaq
Composite fell 2.6%.

Some pointed a finger at U.S. retail investors who had
forced a massive squeeze on hedge funds that held short
positions in stocks such as GameStop.

"We could see much more choppiness and much more volatility.
We have a bit of a perfect storm heading into the month end,
which is weighing on equity markets, but I don't think at the
moment we are in a place where it's going to come crashing off,"
Hewson said.

On the data front, analysts said the focus will be on German
inflation figures and fourth-quarter U.S. economic growth.

Yields on the 10-year U.S. Treasury bond fell
below 1% for the first time in three weeks overnight in a
further sign of a shrinking demand for risk.

ASIA WEAKER

Asian shares slid on Thursday while the safe-haven dollar
rallied as Wall Street's sell-off and delays in coronavirus
vaccines provided an excuse to book profits on recent gains.

MSCI's broadest index of Asia-Pacific shares outside Japan
fell 2%, with valuations looking stretched after
the index rose more than 6% just this month.

Japan's Nikkei fell 1.5%, its sharpest drop since
October, and Chinese blue chips lost 2.7% as liquidity
tightened before the Lunar New Year holidays.

South Korea fell 1.7%, led by losses in Samsung
after it reported earnings.

Even the tech darlings were not immune. Facebook
dropped despite reporting earnings well above expectations.
Apple Inc also handily beat forecasts, but its shares
lost 3% after the bell.

Dealers noted the market had focused more on a downbeat
economic outlook from the Federal Reserve overnight than on its
pledge of continued policy support.

The safe-haven U.S. dollar gained, with its index up at
90.771 from a January low of 89.206.

The euro fell to $1.2093 amid reports the European
Central Bank felt markets were under-pricing the risk of more
rate cuts.

The bounce in the dollar kept gold prices soft around $1,837
an ounce.

Global demand concerns restrained oil prices despite a drop
in U.S. crude stocks. U.S. crude fell 34 cents to $52.51
a barrel. Brent crude futures dropped to $55.50.

(Additional reporting by Alwyn Scott; editing by Christian
Schmollinger, Ana Nicolaci da Costa, Larry King)