(Refiles to add headline tag)
* World stocks down 0.2 pct
* Cohn's departure seen as tilting U.S. towardsprotectionism
* Dollar falls vs yen; Canada dlr, Mexico peso fall
* For a live blog on European stocks, type LIVE/ in an Eikonnewswindow
By Alasdair Pal
LONDON, March 7 (Reuters) - Global stocks and the dollarfell on Wednesday after a strong advocate of free trade resignedfrom the White House, fanning fears that U.S. President DonaldTrump will proceed with protectionist tariffs and risk a tradewar.
Economic adviser Gary Cohn, seen as a bulwark againstprotectionist forces within the Trump administration, said onTuesday he was leaving, sparking a global sell-off across anumber of major asset classes. world equity index .MIWD00000PUS , which tracksshares in 47 countries, was down 0.2 percent, having seen somestrength in Asian trading following news that South and NorthKorea would hold their first summit in more than a decade.
Equity futures pointed to the benchmark U.S. S&P 500 index ESc1 opening 0.7 percent lower, with Dow Jones futures 1YMcl down 1 percent.
Wall Street's fear gauge, the CBOE Volatility index .VIX ,was up around 8 percent.
In Europe the continent's car-makers .SXAP , which face therisk of a hike in import tariffs to the United States, wereamong the worst performers, falling 0.5 percent. European stocksas a whole .STOXX recovered some of their early losses totrade down 0.1 percent.
"The implication is that without the restraining influenceof Cohn on Trump, the president will now have a free hand topress ahead with further tariffs and generally up the ante ontrade," said Neil Wilson, an analyst at ETX Capital.
"This in itself does not bode well for risk despite thatsmall boost we saw on news that North Korea could considerde-nuking."
RISK AVERSION
Cohn's departure rippled through foreign exchange andcommodity markets.
The U.S. dollar fell 0.4 percent against the Japanese yen JPY= -- seen a safe-haven in times of uncertainty.
The dollar is just off a 14-month low against the yen hit onFriday. worst outcome for financial markets, in terms ofpotential to create volatility, would be a confirmation ofrising trade friction and benign neglect of the dollar in theshort term," said analysts at ANZ.
The Canadian dollar CAD= and the Mexican peso MXN= bothretreated by more than 0.5 percent against the dollar as Cohn'sdeparture was seen as raising risks that Washington could walkaway from NAFTA negotiations.
Commodities fell on worries that trade friction could slowglobal growth, with Brent crude futures LCOc1 giving up theprevious day's gains to drop 0.5 percent.
Copper on the London Metal Exchange CMCU3 lost 1.2percent, paring a 1.4 percent gain from the previous session.
Currencies of commodity producers South Africa ZAR= andRussia RUB= were both down more than 0.5 percent against thedollar, with the rand under particular pressure on fallingreserves and business confidence. government bonds DE10YT=RR rallied, with yieldsacross the euro zone falling by 1-3 basis points, followingsimilar strengthening in U.S. Treasuries US10YT=RR overnight.