* Tensions over Iran, trade jitters weigh
* Pan-European STOXX 600 index down 0.3%
* Wagers on more dovish Fed talk keep yields, dollar down
* Gold extends gains as rates and dollar drop
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
By Tom Arnold
LONDON, June 25 (Reuters) - European shares were spooked by Iran tensions and trade jitters on Tuesday, while the risk of more dovish talk from the Federal Reserve inflated gold to six-year highs and stoked demand for safe-harbour currencies like the yen and Swiss franc.
Taking a dramatic step to increase pressure on Iran, U.S. President Donald Trump on Monday signed an executive order imposing sanctions on Supreme Leader Ayatollah Ali Khamenei and other top officials.
The move is a further worry for investors waiting anxiously to see if anything comes of Sino-U.S. trade talks later this week, with sentiment not helped after a senior U.S. official said president Donald Trump would be happy with "any outcome" from the trade talks with China. pan-European STOXX 600 index .STOXX fell 0.3%, with the technology sector .SX8P bucking the trend on the back of Capgemini's CAPP.PA purchase of engineering and digital services company Altran ALTT.PA for 3.6 billion euros ($4.10 billion). shares rose 7% and those in rival SAP SE SAPG.DE 0.3%, pushing the sector around half a percent up. Altran surged 21%.
"Our view is that because of the very high global economic uncertainty markets have become very twitchy and can move a long way on not much news like Trump's meeting with Xi at the G20," said Gerry Fowler, global multi-asset strategist at Aberdeen Standard Investments.
"At the moment, the data looks okay but the sentiment has deteriorated and we expect that to continue in the second half of the year," he added.
Trump is slated to meet one-on-one with at least eight world leaders at the G20 summit in Osaka, including China's President Xi Jinping and Russian President Vladimir Putin. investors seemed none too hopeful as Shanghai blue chips .CSI300 slipped 1%. That led MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS down 0.4%.
Japan's Nikkei .N225 lost 0.4%, while S&P 500 e-minis ESc1 edged down 0.2%.
FED SPEAKERS
There are no fewer than five Fed policy makers speaking on Tuesday, including Chair Jerome Powell, and markets assume they will stick with the recent dovish message.
"It's always possible the chair could walk back some of the market's dovish interpretation of last week's FOMC meeting...but we suspect he will reinforce the message laid out last week," said Kevin Cummins (NYSE:CMI), a senior U.S. economist at NatWest Markets.
"By the end of July, we believe the Fed will have seen enough to decide that action to counter downside economic risks and low inflation/inflation expectations is warranted, and so we look for a 25 basis point rate cut at the next FOMC meeting."
Markets are running well ahead of that. Futures 0#FF: are fully priced for a quarter-point easing and imply around a 40%chance of a half-point move.
A total 100 basis points of cuts are implied by mid-2020, a major reason two-year yields US2YT=RR are well under cash at 1.715%. FEDWATCH
GOLD SOARS
Yields on 10-year Treasuries US10YT=RR have dived 120 basis points since November and, at 1.99%, are almost back to where they were before Trump was elected in late 2016.
German 10-year bund yields hit a new record low of 0.332% DE10YT=RR , down 2 basis points on the day. dollar has fallen for four sessions in a row against a basket of other currencies to stand at a three-month low of 95.989 .DXY .
"USD DXY now looks likely to break through the March low of 95.76 and below there 95.0," said Tapas Strickland, a markets strategist at NAB.
"The drivers here continue to be heightened expectations of the Fed cutting rates - now 3.1 cuts priced by years' end," he said, noting that a number of index trackers showed the dataflow from the United States was now showing more disappointing misses than Europe.
The euro hit a three-month high of $1.1412 EUR=EBS , having gained 2.0% from a two-week low of $1.1181 touched a week ago as the dollar has lost steam. It last stood at $1.1396.
Against the safe-harbour yen, the dollar hit its lowest since the January flash crash at 106.79 JPY= . Dealers also noted a report from Bloomberg that Trump had privately mused about ending the postwar defense pact with Japan.
Against the Swiss franc, the dollar fell to its lowest in nine months and was last at 0.9755 CHF= .
The pullback in the dollar combined with lower yields globally lit a fire under gold, which touched a six-year top. The metal is up 12% in the past month at $1,1433.16 an ounce XAU= . GOL/
Oil prices lost some ground on Tuesday, after rising sharply last week in reaction to tensions between the United States and Iran. O/R
Brent crude LCOc1 futures eased 0.4% to $64.58 while U.S. crude CLc1 fell 0.3% to $57.75 a barrel.