By Marc Jones
LONDON (Reuters) - U.S. government bond yields, the benchmark for global borrowing costs, hit an all-time low on Tuesday and the yen jumped as weak Chinese data and Brexit worries triggered a fresh scramble for the safest and most liquid assets.
Risk aversion swept though markets as data showing China's manufacturing growth stalled last month coupled with warnings from the Bank of England that the UK's vote to leave the European Union was already having an economic impact.
Investors made a dive for bonds, sending 10-Treasury yields as low as 1.377 percent and Swiss yields negative all the way out to 50 years on bets the world's major central banks will wade in with yet more stimulus.
"Everything is still being driven by one main factor and that is that central banks still have their taps on," said Neil Williams, chief economist at fund manager Hermes.
"It seems to me that Brexit has global implications ... and when an $11 trillion economy (China) which accounts for a large chunk of the world's commodity demand slows down, you have to take notice."
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Stocks were firmly out of favour. Wall Street was expected to reopen after a long weekend down roughly 0.5 percent [N/].
European shares were down 1.5 percent as weaker commodity stocks and ongoing worries about Italian banks that have seen their value drop almost 60 percent this year [.EU] more than offset small rise for London's FTSE on the back of Bank of England rate cut hints.
In the currency market, the safe-haven yen rose almost one percent against the euro and dollar [FRX/] as Brexit-battered sterling hit another 31-year low.
BREXIT
Uncertainty in the run-up to Britain's vote on its EU membership last month had already seen growth in its dominant service sector hit a three-year low data showed and pushed businesses expectations to their weakest since the end of 2012.
Bank of England Governor Mark Carney said he thought the bank would need to cut it already record low interest rates and possibly provide other stimulus over the summer to cushion the Brexit shock.
"There is a prospect of a material slowdown in the economy," he added, warning also that the UK had "entered a period of uncertainty and significant economic adjustment."
Insurers Aviva and Standard Life have both suspended property funds as a result of withdrawals.
"The problem these funds face is that it takes time to sell commercial property to meet withdrawals, and the cash buffers built up by the managers have been eroded by investors heading for the door, both in the run up to the EU referendum," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
Sterling slumped to a new 31-year low of $1.3112 as it fell 1.3 percent on day.
U.S. DATA, FRAGILE CHINA
The U.S Commerce Department will release a report that is expected to show later that new orders for manufacturing goods fell by 1 percent in May, compared to 1.9 percent in April.
The overnight data from China had shown that while the country's growing services sector saw activity rise to an 11-month high in June, a composite measure of activity including manufacturing fell to a four-month low.
Nervousness was also seeping back in about Beijing's intentions for its currency, the yuan, as the country's central bank fixed its daily yuan/dollar reference rate at a fresh 5-1/2-year low.
Back in Europe, the euro slid 0.2 percent to $1.1130, but retained most of the gains made since its 3 1/2-month low of $1.0912 hit in the wake of the UK referendum, while the yen jumped 0.8 percent as it slice back above 102 to dollar to 101.79.
The 'risk-off' sentiment was further compounded as oil fell below $50 a barrel on Tuesday, as concern about a potential slowdown in economic growth that would weigh on demand trumped supply outages in Nigeria and other exporting nations.
Brent crude was down $1.42 at $48.67 a barrel and U.S. crude dropped $1.54 at $47.45 a barrel.
(Editing by Jeremy Gaunt)