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Oct 3 (Reuters) - Blackrock:
* "Equity and bond returns are becoming more correlated and could fall in tandem, while rising long-term yields are a tail risk"
* Central bank asset purchases smothered volatility, pushed investors to take greater risks, but could see short bursts of heightened volatility
* China's "yuan stability and debt build-up remain medium-term risks"
* "We prefer shorter-duration U.S. government bonds and favor selected Eurozone peripheral debt over other sovereigns"
* Expect U.S. Fed to press on with slow interest rate increases
* "A divisive U.S. Presidential election is the top political risk"
* "Dividend stocks may come under pressure from higher bond yields, so we prefer companies that can sustainably grow dividends"
* "Near-term China risks have receded amid a gradual currency depreciation and a pick-up in Asia'S export machine" Further company coverage: