GLOBAL MARKETS-U.S. stock futures, oil slide as trade wars stoke global recession anxiety

* S&P500 futures down 0.5% at 3-month lows
* 10-year U.S. bond yields at lowest since Sept 2017
* 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, Asian share
markets and oil prices slipped to multi-month lows on Monday on
worries intensifying Sino-U.S. tensions 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 early
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.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was little changed in early trade, but held
barely above last week's four-month low. The CSI 300 index of
Chinese shares .CSI300 advanced 0.9%, but kept within its
recent range.
Helping the mood, a private survey on Chinese manufacturing
sector CNPMI=ECI published on Monday pointed to a modest
expansion in factory activity as export orders bounced from a
contraction. Yet the slightly better reading is unlikely to allay growing
fears about the economic impact from an escalating trade dispute
with the United States. Indeed, a run of Chinese data recently,
including an official survey on the nation's manufacturing
industry last week, showed rising pressure across the world's
no. 2 economy.
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 a rate cut by September, with about 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 1.1% in
early trade to $52.92, having touching their weakest levels
since mid-February earlier in the day.
Brent crude futures LCOc1 tumbled 1.5% to $61.06 per
barrel.
Copper futures in Shanghai SCFc1 fell 0.5% to two-year
lows.
In the currency market, the safe-haven yen held firm. The
dollar changed hands at 108.19 yen JPY= , having dipped to as
low as 108.17, its weakest level since mid-January.
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 Chinese yuan traded at 6.9418 per dollar CNH= , near
5-1/2-month lows of 6.9497 touched on May 17.
The Mexican peso, hit by Trump's sudden threat to impose
tariffs on Friday, regained some stability, trading at 19.6355
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)