* China May industrial production growth at 17-year low
* German 10-yr Bund yields hit fresh record low
* European stocks suffer biggest fall in two weeks
* Tech stocks lead falls after Broadcom warning hits
chipmakers
Wall Street expected to open lower
* Caution seen prevailing ahead of Fed's meeting next week
* Spot gold hits 14-month highs
By Karin Strohecker
LONDON, June 14 (Reuters) - World stocks struggled and safe
haven bets were back in play on Friday with German bond yields
plumbing record lows as Chinese data rekindled woes about the
health of the global economy and fears of a new U.S.-Iran
confrontation intensified.
Data from Beijing painted a fairly gloomy picture of the
world's second largest economy as the trade war with the United
States starts to bite. May industrial output growth slowed to a
more than 17-year low, well below expectations, while
fixed-asset investment also fell short of forecasts.
Expectations for more stimulus in China are growing as the
Sino-U.S. trade dispute threatens to escalate into a full-blown
trade war that many fear could push the global economy into
recession. The data saw yields on German 10-year Bunds -- seen as one
of the safest assets in the world -- fall to fresh record lows.
U.S. Treasury yields were also grinding lower. Safe-haven bond
yields have already fallen in recent days amid rising
speculation about monetary easing by major central banks. Spain
bond yields have fallen for the first time below 0.5%.
Gold prices hit a 14-month high. GOL/ "The Chinese data was disappointing, especially the
industrial output numbers," said Chris Scicluna, head of
economic research at Daiwa Capital Markets. "That's given bond
markets additional momentum."
Equity markets across Europe chalked up hefty losses on the
risk-off sentiment, with a warning by U.S. chipmaker Broadcom
Inc AVGO.O of a slowdown in demand due to trade tensions and
the U.S. ban on Chinese tech and mobile phone company Huawei
Technologies exacerbating the glum mood.
The pan-European STOXX 600 index .STOXX fell 0.5%, with
Germany's trade-sensitive DAX .GDAXI falling 0.6%.
European tech shares led the indexes lower, with
semiconductor companies Infineon IFXGn.DE , AMS AMS.S ,
STMicroelectronics STM.MI , Siltronic WAFGn.DE and Dialog
Semiconductor DLGS.DE all dropping between 2%-3% after
Broadcom outlined the impact of a total halt in sales to Huawei.
.EU
"The sales warning from Broadcom is also weighing on markets
this morning as it suggests that both semiconductor and auto
sectors are under pressure worldwide," said Christophe Barraud,
chief strategist at brokerage Market Securities in Paris, adding
that expectations for a rebound were now shifting from the
second half of this year to 2020.
"Given both these sectors are key for world trade, it's not
good news for trade."
U.S. stock futures indicated Wall Street was in line for a
lower open, with the S&P e-mini ESc1 pointing to a 0.2% fall.
Wall Street shares have had a strong run in June on hopes
the Federal Reserve will ease monetary policy soon to counter
pressure on the U.S. economy from the escalating trade war. The
S&P 500 .SPX index is up about 5% so far this month.
WAIT FOR THE FED
The Fed's June 18-19 meeting will give investors an
opportunity to see if the U.S. central bank's monetary policy
stance matches market expectations for a near-term rate cut.
A Reuters poll showed a growing number of economists expect
the Fed to cut interest rates this year although the majority
still expect it to stay on hold. "There is a large degree of uncertainty going into next
week's FOMC (Federal Reserve Open Committee) meeting as market
reaction will differ significantly depending on whether the Fed
hints toward easing policy," said Shusuke Yamada, chief Japan FX
and equity strategist at Bank Of America Merrill Lynch.
"A wait-and-see mood is likely to begin prevailing in the
markets ahead of the FOMC."
Growing worries about a new U.S.-Iranian confrontation after
two attacks on two oil tankers in the Gulf of Oman on Thursday
added to the unhappy mood.
Washington blamed Iran, but Tehran bluntly denied the
allegation. But U.S. and European security officials as well as
regional analysts left open the possibility that Iranian
proxies, or someone else entirely, might have been responsible.
The attacks set crude prices on a roller coaster ride, with
Brent futures LCOc1 slipping 0.2% to $61.18 per barrel. Brent
surged 2.3% on Thursday after the Norwegian- and Japanese-owned
tankers both experienced explosions.
In currency markets, the dollar's index .DXY against a
basket of six major currencies was little changed at 96.957
after ending the previous day nearly flat, with caution ahead of
the Fed meeting keeping the greenback in a tight range.
The euro was steady at $1.1282 EUR= while the greenback
inched down 0.2% to 108.19 yen JPY= .
The Australian AUD=D4 and New Zealand dollars NZD=D
fell on Friday as bets on interest rate cuts undermined demand
and Group of 20 meeting later this month sidelined investors.