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STOXX 600 falls 1%, U.S. futures lower

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Nikkei dives over 4%

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Trump says US tariffs to cover all countries

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Flight to safety buoys bonds, gold hits record

By Samuel Indyk and Wayne Cole

LONDON, March 31 (Reuters) - World share markets fell

sharply on Monday and gold surged to another new record after

U.S. President Donald Trump said tariffs would essentially cover

all countries, stoking worries a global trade war could lead to

a recession.

Trump's comments to reporters on Air Force One seemed to

dash hopes the levies would be limited to a smaller group of

countries with the biggest trade imbalances.

Trump is due to receive tariff recommendations on Tuesday

and announce initial levels on Wednesday, followed by auto

tariffs the day after.

"What the Trump administration has shown us so far is that

you should not expect a consistent approach," said George

Lagarias, chief economist at Forvis Mazars.

"This is what scares the market the most. Inconsistency

breeds uncertainty, and markets hate uncertainty."

Europe's STOXX 600 fell 1% to its lowest level in

almost eight weeks, while major indexes in Frankfurt,

London and Paris fell between 0.8% and 1%.

S&P 500 futures lost 0.7%, extending Friday's

rout, while Nasdaq futures shed 1.1%.

Japan's Nikkei led the rout in Asia, losing an

eye-watering 4.1% and falling to a six-month low as automaker

stocks continued to suffer fallout from Trump's talk of 25%

tariffs on imported cars.

MSCI's broadest index of Asia-Pacific shares outside Japan

shed 1.9%.

Seeking any safe harbour from the trade storm, investors

piled into sovereign bonds and the Japanese yen and pushed gold

prices to another all-time high.

The European Union was ready to respond with tariffs of

its own, German Chancellor Olaf Scholz said on Sunday, but there

were also reports the block was preparing a list of concessions

to offer to Trump.

"For the first time in years, we find ourselves genuinely

worried about risk assets," said Ajay Rajadhyaksha, head of

rates markets at Barclays.

"If policy chaos and trade wars worsen much further, a

recession is now a realistic risk across major economies," he

added. "For the first time in many quarters, we favour core

fixed income over global equities."

THAT "R" WORD

Many economists are worried that tariffs will hit the U.S.

economy hard, even as they limit the Federal Reserve's scope to

cut rates by driving inflation in the short term.

Analysts at Goldman Sachs now see a 35% chance of a U.S.

recession, up from 20% previously, saying they expect Trump to

announce reciprocal tariffs that average 15% across all U.S.

trading partners on April 2.

Data out on Friday underlined the risks as a key measure of

core inflation rose by more than expected in February while

consumer spending disappointed.

That raised the stakes for the March payrolls report due on

Friday where any outcome below the 140,000 gain expected would

only add to recession fears. Also due are a rush of surveys on

factories and services, along with figures on trade and job

openings.

Bond investors seemed to be betting the slowdown in U.S.

economic growth will outweigh a temporary lift in inflation and

prompt the Fed to cut rates by about 80 basis points this year.

This, combined with a flight from risk assets, saw 10-year

Treasury yields drop as low as 4.184% while two-year

yields hit 3.842%. Germany's 10-year yield

fell as low as 2.659%, its lowest since March 5.

The outlook for rates could become clearer when Fed Chair

Jerome Powell speaks on Friday, following a host of other Fed

speakers this week.

The drop in U.S. yields saw the dollar ease 0.4% to 149.19

yen, while the euro held at $1.0825. The

dollar index was steady at 103.97, having slipped for the

previous two sessions.

The perceived safety of gold saw the metal hit another

all-time high at $3,128.06 an ounce.

Brent rose 0.6% to $74.07 a barrel, while U.S. crude

added 0.5% to $69.70 per barrel as U.S. President Trump

threatened secondary tariffs on buyers of Russian oil if he

feels Moscow is blocking efforts to end the war in Ukraine.

(Editing by Shri Navaratnam, Lincoln Feast and Joe Bavier)