US STOCKS-Futures drop as trade tensions spark recession fears, flight to safety

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* Futures down: Dow 0.31%, S&P 0.33%, Nasdaq 0.55%

By Medha Singh and Amy Caren Daniel
June 3 (Reuters) - U.S. stock index futures fell on Monday,
signaling Wall Street's main indexes would extend last month's
losses at the open, as the multi-front trade war made investors
increasingly risk averse and fueled worries of a recession.
May kicked off with a sharp escalation in U.S.-China trade
tensions as the two sides imposed tit-for-tat tariffs and the
month ended with the United States threatening to levy duties on
all Mexican imports unless it curbs illegal immigration, adding
to global growth worries.
Wall Street's three main indexes lost at least 6% last
month, their first negative monthly performance this year. The
S&P 500 .SPX is now 7.3% off its record high hit on May 1.
Investors' flight to the security of government bonds and
other safer bets continued on Monday as the war of words between
the world's two largest economies ramped up over the weekend.
This pushed yields on U.S. two-year notes toward their
biggest two-day fall since the start of the global financial
crisis in 2008, reflecting growing conviction that the Federal
Reserve will start cutting interest rates to stave off
recession. US/
Yields on 10-year notes have been firmly below those on
three-month notes US3MYT=RR , an inversion that is now at its
deepest since 2007. The inversion of the yield curve is seen as
a warning of recession.
Shares of Wall Street's big lenders - JPMorgan Chase & Co
JPM.N , Bank of America Corp BAC.N and Morgan Stanley MS.N
- were down between 0.3% and 1.3%.
Boeing Co BA.N , the largest U.S. exporter to China,
dropped 0.8% in premarket trade.
Factory activity contracted in most Asian countries and the
euro zone last month, the latest evidence of the fallout of the
U.S.-China trade war. In the United States, the ISM manufacturing activity survey,
due at 10:00 a.m. ET, is likely to show the reading on the index
rose to 53 in May from 52.8 a month earlier.
At 7:17 a.m. ET, Dow e-minis 1YMc1 were down 78 points, or
0.31%. S&P 500 e-minis ESc1 were down 9 points, or 0.33% and
Nasdaq 100 e-minis NQc1 were down 39.5 points, or 0.55%.
Among stocks, FedEx Corp shares FDX.N dropped 3.0% after
Chinese media reported that Beijing would investigate whether
FedEx damaged the legal rights and interests of its clients,
after telecoms giant Huawei HWT.UL said parcels intended for
it were diverted. Alphabet Inc GOOGL.O dropped 3.1% after sources said the
U.S. Justice Department is preparing an investigation of the
Google-parent to determine whether the company broke antitrust
laws in operating its sprawling online businesses. Shares of health insurer Centene Corp CNC.N slipped 6.8%
after bigger rival Humana Inc HUM.N said it would not make a
proposal to combine with the company. Cypress Semiconductor Corp CY.O surged 25.1% after German
chipmaker Infineon Technologies agreed to buy the U.S. peer in a
deal valued at 9 billion euros ($10.1 billion), including debt.