LONDON, May 23 (Reuters) - European stocks tumbled, the euro gave back some gains, and euro zone government bond yields fell sharply on Friday after U.S. President Donald Trump said he is recommending a straight 50% tariff on goods from the European Union starting on June 1.
Trump's remarks in a social media post, brought a sudden halt to investors expectations that the bulk of tariffs Trump announced in early April would be negotiated away, a view which had supported stocks market gains in recent weeks.
Europe's broad Stoxx 600 index (.STOXX), was last down 2%, with auto and banking stocks both falling well over 3%. (.SXAP),
U.S. S&P 500 futures also fell around 1.5%, as investors also worried that the tariffs would hurt U.S. and global growth.
"This is a major escalation of trade tensions," said Holger Schmieding, chief economist, at Berenberg.
"With Trump you never know but this would be a major escalation. The EU would have to react and it is something that would really hurt the U.S. and European economy."
Investor expectations that tariffs would hurt economic growth in the currency bloc caused them to up bets on the scale of European Central Bank easing this year, and sent them scurrying to government bonds.
Germany's rate-sensitive two year bond yield was last down 10 basis points at 1.73%, while benchmark 10 year yields were down 9 bps at 2.55%. ,
In currency markets the biggest gainer was the safe haven Japanese yen. The dollar was last down 0.9% on the yen at 142.77, while the euro was down 0.56% at 161.43 yen. ,
The euro was more muted versus the dollar - in recent weeks investors have sold the U.S. currency when worried about tariffs - and so traders had to balance that with concern about the euro zone growth outlook.
The euro gave back some of its earlier gains against he dollar on the tariff news, but remained 0.3% higher on the day at $1.1311.
Reporting by Alun John, editing by Dhara Ranasinghe
