By Dion Rabouin
NEW YORK (Reuters) - Stocks on major world markets fell and benchmark U.S. government bond yields hit an all-time low on Tuesday, as worries about Britain's exit from the European Union pushed sterling to a fresh 31-year low, triggering a scramble for the safest and most liquid assets.
Investor confidence was undermined by the Bank of England's warning on the economic risks of "Brexit" and its steps to ensure British banks keep lending, as well as by news of a decline in U.S. factory orders and reports of mixed manufacturing and service sector activity in Asia and Europe.
Bank of England governor Mark Carney said that the global loss of risk appetite could persist for some time and Chinese Premier Li Keqiang said it could be hard to sustain 6.7 percent growth in the second quarter.
Investors bought safe-haven assets as a result like U.S. government debt and the Japanese yen, pushing 10-year Treasury yields as low as 1.375 percent and the yen up 1.0 percent against the U.S. dollar.
"Uncertainty is still very large," said David Keeble, global head of interest rate strategy at Credit Agricole Corporate & Investment Bank in New York. "This is just sort of a risk-off fear about what's going on."
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Government bond yields around the globe fell with Swiss yields negative all the way out to 50 years and British, German and Japanese 10-year yields at or near their lowest levels on record as investors raised bets that the world's major central banks would add more stimulus.
Wall Street stocks fell with the Dow Jones industrial average down 0.55 percent to 17,850.55, the S&P 500 index off 0.74 percent at 2,087.34, and the Nasdaq Composite down 0.97 percent at 4,815.35 late morning in New York.
MSCI's gauge of global stocks, which tracks markets in 45 countries, dropped by just under 1.0 percent.
European shares were down 1.6 percent as weaker commodity stocks and ongoing worries about Italian banks that have seen their value drop almost 60 percent this year more than offset small rise for London's FTSE on the back of Bank of England interest rate cut hints.
Sterling suffered, falling more than 1.5 percent to a low of $1.3051, its lowest since 1985.
The euro also fell, but less precipitously, losing 0.25 percent againt the dollar to $1.1126.
Crude oil fell below $48 a barrel 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 4.4 percent at $47.88 a barrel and U.S. crude dropped 4.5 percent to $46.79 a barrel.
(Reporting by Dion Rabouin)