NEW YORK/LONDON, June 4 (Reuters) - World stocks and commodities slid on Tuesday, as investors turned uneasy about evidence that the U.S. economy's "exceptionalism" may be starting to unwind, after data showed surprising weakness in business activity.
The risk that the U.S. economy might be softening more than expected was brought to the fore again on Tuesday when data showed job openings fell more than forecast in April to the lowest in more than three years.
That helped to reinforce some investor speculation that the Federal Reserve could be on track to lower interest rates this year as a cooling economy tempers inflation pressures. In response, Treasury yields briefly extended their declines early on Tuesday morning, before recovering somewhat.
"Markets are back to thinking two rate cuts is the likeliest path of Fed rate policy over the rest of the year," said Nicholas Colas, the co-founder of DataTrek Research. "The past week's softer-than-expected economic data explains the rethink."
By 1726 GMT, the MSCI All-World index (.MIWD00000PUS), opens new tab was down 0.4%. On Wall Street, the S&P 500 index (.SPX), opens new tab fell 0.2%, the Dow Jones Industrial Average (.DJI), opens new tab was flat and the Nasdaq Composite (.IXIC), opens new tab dipped 0.3%.
Several measures of volatility picked up, reflecting a degree of nervousness among traders, while classic safe-haven assets like bonds and the dollar remained in positive territory.
Oil, copper and gold also fell in the face of the stronger U.S. currency.
Earlier in the day, the dollar touched its lowest in over two months against the euro and the pound, as investors have bought into the idea that the U.S. economy is slowing enough to warrant rate cuts this year.
"It is understandable why the market behaved as it did in the first quarter, but if one looked at broader indicators, there have always been certain signs that maybe the story isn't quite as strong as might have been expected," Daiwa Capital economist Chris Scicluna said.
"Most people would have assumed that where the fed funds rate is right now is in restrictive territory. That is bearing down on underlying inflation and bearing down on some of the dynamism in spending," he said.
Stocks in Europe slid, led by energy, mining and banking shares, pushing the STOXX 600 (.STOXX), opens new tab down by as much as 0.9%. It had trimmed losses and had lost 0.4% by 1446 GMT.
Wall Street's so-called "fear index", the VIX (.VIX), opens new tab rose by the most in a week, echoing a sharp rise in the Euro STOXX volatility index (.V2TX), opens new tab to a one-month high.
In India, share markets sold off sharply after early vote counting showed Prime Minister Narendra Modi's Bharatiya Janata Party (BJP)-led alliance was not headed for a landslide win as predicted.
A Modi victory had been expected to be positive for the country's financial markets, according to analysts, on the hope India will undertake further economic reform.
The reduced prospect of Modi's alliance winning an overwhelming majority rattled investors.
The Nifty index (.NSEI), opens new tab dropped as much as 8.6% before recovering some of those losses, while the BSE index (.BSESN), opens new tab dropped almost 6%. Both indexes had touched all-time highs on Monday.
Political jitters also knocked the Mexican peso and South Africa's rand , which dropped by 1.4% and 1.1% respectively, following election results in both those countries.
JOBS, JOBS, JOBS
This week brings a slew of major data. Non-farm payroll figures for May are out on Friday, following Tuesday's Job Openings and Labor Turnover Survey.
On Monday, U.S. Treasury yields fell to the lowest point in two weeks, after the country's manufacturing activity slipped for the second consecutive month in May.
The yield on benchmark 10-year Treasury notes fell 8 basis points to 4.3221% to a two-month low, while the two-year yield , which rises with traders' expectations of higher Fed fund rates, fell 6 bps to 4.7579%.
"The sharper move at the long-end is a sign that weaker manufacturing data is unlikely to shift the dial on Fed rate cuts near term, but is perhaps a signal of the market's view of neutral interest rates as US economic exceptionalism fades," Westpac economist Jameson Coombs said in a note on Tuesday.
In Europe, investors expect the European Central Bank on Thursday to cut the benchmark rate by 25 basis points to 3.75%.
The dollar fell 1% against the yen, viewed by many as a safe-haven asset because of the low interest rate it bears, to 154.71 , around its lowest for two weeks and over 3% down from late April's multi-year high at 160.03.
The euro fell 0.2% to $1.08795, while sterling slipped 0.1% to $1.27930. The dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was flat on the day at 104.09.
U.S. crude fell 0.9% to $73.57 a barrel. Brent crude also fell 0.8% to $77.76. Both benchmarks hit four-month lows on Monday after the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, agreed to start unwinding some production cuts from October.
Gold dropped 0.9% to $2,328.49 an ounce, while copper , which hit record-highs last month, rose 1.5% to $10,193 a tonne.
Additional reporting by Scott Murdoch in Sydney; Editing by Chizu Nomiyama, Philippa Fletcher and Emelia Sithole-Matarise
