GLOBAL MARKETS-Stocks, commodities slide as Trump's trade threats fan recession worries

* S&P500 futures down 0.5% at 3-month lows
* European stocks seen falling 0.4-0.7%
* Money market futures price in 50% chance of Fed rate cut
by July
* Oil plunge, Shanghai copper at 2-year low
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano
TOKYO, June 3 (Reuters) - U.S. stock futures and commodity
prices slipped while bonds rallied on Monday on worries an
intensifying Sino-U.S. trade tussle and Washington's new tariff
threats against Mexico could tip the global economy into a
recession.
The E-mini futures for S&P500 ESv1 dropped 0.5% in Asian
trade to 2,738, near their March low of 2,722 while Japan's
Nikkei .N225 skidded 1.1% to a four-month low.
European shares are expected to follow suit, with futures
for Britain's FTSE FFIc1 and Germany's DAX FDXc1 down 0.5%
and 0.8%, respectively.
Ex-Japan Asia fared better as gains in South Korea .KS11
and India .BSESN offset weakness elsewhere, with MSCI's
broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS up 0.35%.
The CSI 300 index of Chinese shares .CSI300 was little
changed.
A private survey on Chinese manufacturing sector CNPMI=ECI
published on Monday suggested a modest expansion in factory
activity as export orders bounced from a contraction.
Yet economists noted the increase in new export orders point
to possible front-loading of U.S.-bound shipments to avoid
potential tariff hikes that U.S. President Donald Trump had
threatened to slap on another $300 billion of Chinese goods.
A run of Chinese data recently, including an official survey
on the nation's manufacturing industry last week, also showed
rising pressure across the world's no. 2 economy.
"Chinese companies probably see the current export
conditions as severe as during the China shock in 2015," said
Wang Shenshen, economist at Tokai Tokyo Research Center.
Indeed, factory activity contracted in most Asian countries
last month as businesses came under pressure from the bitter
trade war between Washington and Beijing. Sino-U.S. tensions escalated during the weekend as the two
countries clashed over trade, technology and security.
A senior Chinese official and trade negotiator said on
Sunday the United States cannot use pressure to force a trade
deal on China, refusing to be drawn on whether the leaders of
the two countries would meet at the G20 summit to work out an
agreement later this month.
China will investigate whether FedEx Corp FDX.N damaged
the legal rights and interests of its clients, the official
Xinhua news agency said on Saturday, after Chinese telecoms
giant Huawei HWT.UL said parcels intended for it were
diverted. "You could see this as a retaliation against Washington's
ban on Huawei. China could list FedEx in its black list of
unreliable firms. We could see more of attacks on individual
companies," said Norihiro Fujito, chief investment strategist at
Mitsubishi UFJ Morgan Stanley Securities.
The standoff between the world's two largest economies go
beyond trade, with tension running high ahead of the 30th
anniversary of a bloody Chinese military crackdown on protesters
around Beijing's Tiananmen Square.
China's Defence Minister Wei Fenghe warned the United States
not to meddle in security disputes over Taiwan and the South
China Sea.
The comments came after acting U.S. Defence Secretary
Patrick Shanahan told the meeting on Saturday that the United
States would no longer "tiptoe" around Chinese behaviour in
Asia. "No one now thinks a deal would be possible at G20. It is
going to be a prolonged battle. Investors are rushing to the
safe assets," Mitsubishi's Fujito said.
In a sign that Sino-U.S. frictions are putting a big strain
on the global economy, South Korea's exports - seen as a
bellwether of world growth- fell 9.4 percent fall in May, worse
than a median forecast for a 5.6 percent decline, official data
showed on Saturday. "Speculators are now building up trading positions to bet on
a recession. If the upcoming U.S. data such as today's ISM
manufacturing survey deteriorates, bearish bets on U.S. stocks
should gain momentum," said Masanari Takada, cross asset
strategist at Nomura Securities.
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 now almost fully pricing
in two rate cuts this year, one by September, with more than 50
percent chance of a move by July 30-31.
JPMorgan now expects the Fed to cut rates twice this year,
a major change from its previous forecast that rates will stay
on hold until the end of 2020.
The 10-year U.S. Treasuries yield fell to as low as 2.121
percent US10YT=RR , a nadir last seen in September 2017.
In oil markets, U.S. crude futures CLc1 dropped 0.7% to
$53.12, having touching their weakest levels since mid-February
earlier in the day.
Brent crude futures LCOc1 tumbled 1.0% to $61.35 per
barrel.
Copper futures in Shanghai SCFc1 fell 0.5% to two-year
lows while safe-haven gold jumped as much as 0.5% to a 10-week
high of $1,312.4 per ounce XAU= .
In the currency market, the risk averse mood buoyed the yen
and the Swiss franc.
The dollar changed hands at 108.19 yen JPY= , having dipped
to as low as 108.07, its weakest level since mid-January.
The Swiss franc rose to its strongest against the euro since
July 2017, climbing to 1.1157 franc per euro EURCHF= .
Concerns about Italy's fiscal policies are also adding fuel
to flight-to-quality bids in German bunds while Italy's debt
yields have risen, with its five-year yield IT5YT=RR
surpassing Greek five-year bond yields GR5YT=RR .
The euro, which has been declining at a steady pace this
year, was little moved $1.1171 EUR= , off last week's low of
$1.1116.
The Mexican peso, hit by Trump's sudden threat to impose
tariffs on Friday, regained some stability, trading at 19.6266
to the dollar MXN=D4 , after its 2.5% fall on Friday.
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
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(Editing by Shri Navaratnam)