GLOBAL MARKETS-Wall St dips, dollar climbs on weak factory data, trade jitters

* All three major U.S. stock indexes in the red
* U.S. factory activity contracted in August - ISM
* Dollar hits more than two-year high
* 10-year Treasury yields hit lowest since July 2016

(Updates to U.S. market open, changes dateline, previous
LONDON, changes byline)
By Stephen Culp
NEW YORK, Sept 3 (Reuters) - Wall Street lost ground and the
U.S. dollar strengthened to its highest level in more than two
years on Tuesday as trade worries persisted and U.S. factory
activity entered contraction territory for the first time since
February 2016.
As new tariffs on Chinese goods went into effect over the
U.S. Labor Day weekend, market participants are apparently
losing faith that the world's two largest economies will reach a
near-term resolution to their long-running trade war, which has
rattled markets for months and weighed on world economies.
U.S. manufacturing output shrank in August for the first
time in 3-1/2 years, according to the Institute for Supply
Management's Purchasing Managers Index (PMI), stoking fears that
the global economic slowdown has reached American shores.
"Any possible optimism regarding the trade talks (was)
dashed by this ISM number, which showed a contraction in factory
activity," said Tim Ghriskey, chief investment strategist at
Inverness Counsel in New York.
"There's optimism that the U.S. will weather the storm with
help from the Fed," Ghriskey added. "But weakness in
manufacturing seems to be persistent. This wasn't a fluke
report."
The Dow Jones Industrial Average .DJI fell 340.49 points,
or 1.29%, to 26,062.79, the S&P 500 .SPX lost 22.79 points, or
0.78%, to 2,903.67 and the Nasdaq Composite .IXIC dropped
67.90 points, or 0.85%, to 7,894.99.
European shares fell for the first time in four sessions on
Tuesday, as uncertainty over a looming no-deal Brexit and
lingering U.S.-China trade tensions dampened investor optimism.
The pan-European STOXX 600 index .STOXX lost 0.38% and
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.56%.
Trade concerns also dampened emerging markets.
Emerging market stocks lost 0.89%. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.75%
lower, while Japan's Nikkei .N225 rose 0.02%.
Trade and Brexit concerns drove the dollar, against a basket
of major world currencies, to its highest level since mid-May
2017, and sent the Euro plunging to a 28-month low versus the
greenback. The dollar index .DXY rose 0.07%, with the euro EUR= up
0.05% to $1.0972.
The Japanese yen strengthened 0.32% versus the greenback at
105.89 per dollar, while Sterling GBP= was last trading at
$1.2068, up 0.02% on the day.
U.S. Treasury yields fell, with the benchmark 10-year yield
at its lowest since July 2016 following the downbeat ISM report
and worries about a weakening global economy in the face of the
U.S.-China trade war. Benchmark 10-year notes US10YT=RR last rose 17/32 in price
to yield 1.4489%, down from 1.506% late on Friday.
The 30-year bond US30YT=RR last rose 34/32 in price to
yield 1.9281%, down from 1.973% late on Friday.
Rising OPEC and Russian production, combined with demand
concerns due to a global economic slowdown dragged down oil
prices. U.S. crude CLcv1 fell 3.39% to $53.23 per barrel and Brent
LCOcv1 was last at $57.60, down 1.81% on the day.
Gold prices held steady, with the safe-haven precious metal
hovering just below its more than six-year high of $1,554.56.
Spot gold XAU= added 0.9% to $1,543.47 an ounce.
Copper CMCU3 lost 0.78% to $5,576.00 a tonne.
Three-month aluminum on the London Metal Exchange CMAL3
lost 0.26% to $1,744.50 a tonne.

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Implied FX volatility: G7 FX, GBP https://tmsnrt.rs/2Po7AHT
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