* S&P500 futures down 0.5% at 3-month lows
* European stocks fall 0.2-0.7%, Wall Street futures lower
* Money market futures see 50% chance of Fed cut by July
* Oil whipsaws, Shanghai copper at 2-year low
* Bond rally drives yields lower
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, June 3 (Reuters) - A stampede to safety sent benchmark government bond yields tumbling on Monday, hoisted the Swiss franc to its highest in nearly two years and gold to a 10-week peak, while oil veered close to bear market territory.
After a torrid May that wiped $3 trillion off global equities, worsening trade tensions and the broader economic backdrop made for a jarring start to June.
European shares .EU and Wall Street futures .N both slipped further after Beijing sent another shot across Washington's bows on trade and euro zone data came in weak, although the main impact was on bonds. government bond yields -- which move inversely to price -- fell to a new all-time low and those on two-year U.S. Treasuries were flirting with their biggest two-day fall since October 2008, at the start of the global financial crisis. are more or less on fire and I think we are going to spend the week with trade dominating everything else," said Societe Generale (PA:SOGN) global strategist Kit Juckes.
With German and UK political concerns and worries about Italy's finances resurfacing, "it is hard to think the yen is not going to be at least one of the winners this week", he said.
The Japanese currency consolidated Friday's biggest one-day jump in over two years at 108.40 yen per dollar JPY= , though Europe's main safety play, the Swiss franc, kept the rally going by scoring a near two-year high against the euro. /FRX
The common currency ticked up to $1.1195 EUR= , having been stuck in one of its tightest ranges ever against the dollar for weeks as investors wait to see how generous the European Central Bank will be with a new tranche of cheap bank funding this week. stocks had fared slightly better overnight as gains in South Korea .KS11 and India .BSESN offset a 4-1/2 month low for Tokyo's Nikkei N225 . Chinese shares .CSI300 ended little changed .SS though the yuan faced pressure. private survey of China's manufacturing sector CNPMI=ECI published on Monday suggested a modest expansion in activity as export orders bounced from a contraction. noted that increases in new export orders pointed to possible front-loading of U.S.-bound shipments to avoid potential tariff hikes that U.S. President Donald Trump has threatened to slap on another $300 billion of Chinese goods.
Trump kicked off a potentially confrontational state visit to Britain on Monday.
"Many firms are leaving China for other countries, including the U.S., in order to avoid paying the tariffs," Trump said on Twitter shortly after landing in Britain. "No visible increase in costs or inflation, but U.S. is taking billions." TENSIONS, FALLING ACTIVITY
With the bitter trade mood weighing, factory activity contracted in most Asian countries and the euro zone last month, surveys showed. euro zone reading slowed for the fourth month running, and more dramatically, as slumping automotive demand, Brexit and wider political uncertainty took their toll.
"The sector remains in its toughest spell since 2013," said Chris Williamson, chief business economist at IHS Markit.
A senior Chinese official and trade negotiator had said on Sunday the United States could not use pressure to force a trade deal, refusing to be drawn on whether the leaders of the two countries would meet at the G20 summit at the weekend.
The standoff between the world's two largest economies goes beyond trade, with tensions running high ahead of the 30th anniversary of a bloody Chinese military crackdown on protesters around Beijing's Tiananmen Square (NYSE:SQ).
China's Defence Minister Wei Fenghe warned the United States not to meddle in security disputes over Taiwan and the South China Sea, after acting U.S. Defense Secretary Patrick Shanahan said Washington would no longer "tiptoe" around Chinese behaviour in Asia. one now thinks a deal would be possible at the G20. It is going to be a prolonged battle. Investors are rushing to the safe assets," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities.
BEWARE OF THE BEARS
The gloomy economic outlook has prompted traders to increase bets that the U.S. Federal Reserve will cut interest rates sooner rather than later.
Fed funds rate futures 0#FF: are almost fully pricing in two rate cuts this year, one by September, with more than a 50 percent chance of a move by July 30-31.
The 10-year U.S. Treasuries yield fell to as low as 2.07% US10YT=RR , a level last seen in September 2017, while bond market volatility gauges have now spiked to the highest in more than two years. .MERMOVE1M
It was lively in commodity markets too.
Brent oil futures LCOc1 tumbled almost 2% to $60.55 per barrel before reassurances from top oil exporter Saudi Arabia pulled them all the way back up to $62.55. Since April they have dropped almost the 20% needed for traders to call a 'bear market'.
Mexico's president Andres Manuel Lopez Obrador hinted on Saturday his country could tighten migration controls to defuse tensions with Trump, saying he expected "good results" from talks planned in Washington this week. Korea exports
https://tmsnrt.rs/2Kn47VJ Messy May for global markets
https://tmsnrt.rs/2WJboFV US 2-year yield in biggest two day fall since 2008 crisis
https://tmsnrt.rs/2WFaY3b
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