GLOBAL MARKETS-Stocks dive, yuan weakens as U.S.-China trade fight intensifies

* Global stocks gauge touches two-month low
* China's yuan weakest since late December
* China to slap tariffs on U.S. goods despite Trump warning
* U.S. Treasuries, yen benefit from safe-haven bid
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(Updates with close of U.S. trading)
By Lewis Krauskopf
NEW YORK, May 13 (Reuters) - Global stock markets tumbled on
Monday and the Chinese yuan weakened to its lowest level since
December as the trade war between the United States and China
escalated.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
1.90%, its biggest one-day drop in more than five months as it
touched a two-month low. Wall Street's main indexes tumbled more
than 2%.
China said it would impose higher tariffs on a range of U.S.
goods, striking back in its trade war with Washington shortly
after President Donald Trump warned it not to retaliate in the
long-running trade dispute between the world's two biggest
economies. Trump said he would meet with Chinese President Xi
Jinping next month. Investors piled into safe-haven assets, including U.S.
Treasuries and the Japanese yen.
"It's clear that there is a lot of nervousness around the
U.S.-China trade negotiations and concern that it's really
deteriorating pretty significantly and that's impacting all
areas of markets," said Kristina Hooper, chief global market
strategist at Invesco in New York.
China's finance ministry said it plans to set import tariffs
ranging from 5 percent to 25 percent on a target list worth
about $60 billion. Trump on Friday ordered his trade chief to
begin the process of imposing tariffs on all remaining imports
from China, but investors had taken solace in some comments from
officials about the negotiations.
"The market thought it was positioning and at the end of the
day there would be a deal and that over the weekend they would
work things out and that is clearly not the way this thing is
going," said Paul Mendelsohn, chief investment strategist at
Windham Financial Services in Charlotte, Vermont.
On Monday, the Dow Jones Industrial Average .DJI fell
617.38 points, or 2.38%, to 25,324.99, the S&P 500 .SPX lost
69.53 points, or 2.41%, to 2,811.87 and the Nasdaq Composite
.IXIC dropped 269.92 points, or 3.41%, to 7,647.02.
"The market has been looking around for an excuse to
correct. We were straight up from Christmas," said Paul Nolte,
portfolio manager at Kingsview Asset Management in Chicago. "We
now have an excuse to have a correction."
The pan-European STOXX 600 index .STOXX lost 1.21%.
In currencies, the yuan CNH= weakened to as far as 6.92
against the U.S. dollar, its lowest level since Dec. 24.
The dollar index .DXY , which measures the greenback
against a basket of currencies, was flat, with the euro EUR=
down 0.04% to $1.1228.
U.S. Treasury yields fell to six-week lows as investors
piled into low-risk assets. Benchmark 10-year notes US10YT=RR last rose 15/32 in price
to yield 2.4015%, from 2.455% late on Friday.
Ten-year yields fell below those on three-month Treasury
bills US3MT=RR . A sustained inversion of this part of the
yield curve has preceded every U.S. recession in the past 50
years.
Spot gold XAU= added 1.1% to $1,299.72 an ounce.
Oil futures fell as worries about the trade talks spooked
investors who had initially sent oil higher on concerns that
tanker attacks in the Middle East could disrupt supplies.
U.S. crude CLcv1 settled down 1% at $61.04 a barrel, while
Brent LCOcv1 settled at $70.23 a barrel, down 0.55%.

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GRAPHIC-Chinese stocks lose shine https://tmsnrt.rs/2LF2yVz
GRAPHIC-Global assets in 2019 http://tmsnrt.rs/2jvdmXl
GRAPHIC-World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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