SINGAPORE/GDANSK, June 3 (Reuters) - European shares slid on Tuesday, along with U.S. stock futures, while the dollar lingered around a six-week low as erratic U.S. trade policies clouded market sentiment and investors turned defensive ahead of key developments later in the week.
U.S. President Donald Trump and Chinese leader Xi Jinping will probably speak this week, the White House said on Monday, days after Trump accused Beijing of violating an agreement to roll back tariffs and trade restrictions.
The call between the two leaders will be closely watched by markets, which have been roiled by tariff-induced trade tensions between the world's two largest economies that continue to simmer.
The gloomy global trade situation left U.S. futures slightly lower, failing to sustain the slight gains made during the cash session on Wall Street overnight.
Nasdaq futures were only slightly down, while S&P 500 futures fell 0.2%.
"We are going to remain in an environment where uncertainty has receded a lot, but remains higher than what we had in (the past two and half years,)" said Samy Chaar, chief economist at Lombard Odier, with the effect that economic agents "freeze" while awaiting clarity.
The Trump administration wants countries to provide their best offer on trade negotiations by Wednesday as officials seek to accelerate talks with multiple partners ahead of a self-imposed deadline in just five weeks.
Data on Monday showed U.S. manufacturing contracted for a third straight month in May, while China's factory activity in May also shrank for the first time in eight months, a private-sector survey showed on Tuesday, indicating U.S. tariffs are starting to hurt manufacturers.
Meanwhile, euro zone inflation eased below the European Central Bank's target last month, data showed on Tuesday, underpinning expectations for another interest rate cut this week.
This, coupled with a strong Japanese auction earlier in the day, sent long-dated euro zone government bond yields lower.
"It's still, I would say, a subpar type of growth environment, (...) but nothing particularly worrying either," Chaar said.
The pan-European STOXX 600 (.STOXX), index fell slightly by 0.2%, while London's blue-chip FTSE 100 (.FTSE), opens new tab was trading flat.
PAYROLLS ON DECK
The dollar fell to a six-week low against a basket of currencies early on Tuesday, ahead of U.S. job openings data later in the day and Friday's U.S. nonfarm payrolls, which will offer a timely reading on the health of the U.S. economy.
The index was last half a percentage point higher at 99.07, erasing earlier losses.
The currency edged higher to 0.8181 Swiss francs after Swiss inflation turned negative in May, marking the first decline in consumer prices for more than four years and adding pressure on the Swiss National Bank to cut its interest rate steeply later this month.
"Supposedly investors are trying to reduce dollar holdings or hedging dollar exposure," said Kenneth Broux, head of corporate research FX and rates at Societe Generale.
"However, if you have countries such as Switzerland where inflation is returning to negative territory and rate differentials keep widening, that may prompt intervention to slow the appreciation of the franc and depreciation of the dollar," Broux said.
Typically a currency will appreciate if its country's rates are higher than those elsewhere.
The euro scaled a six-week top before trading lower on the day at $1.1389, while sterling dipped 0.34% to $1.3498.
Later in the week, a rise in unemployment, among other factors, could get the Federal Reserve to start thinking of easing policy again, with investors having largely given up on a cut this month or next.
A softer U.S. jobs report would be a relief for the Treasury market, where 30-year yields continue to flirt with the 5% barrier as investors demand a higher premium to offset the ever-expanding supply of debt.
The Senate will start considering a tax-and-spending bill this week that would add an estimated $3.8 trillion to the federal government's $36.2 trillion in debt.
In commodities, oil prices rose on concerns about supply, with Brent crude futures up 0.43% to $64.91 a barrel, while U.S. crude gained 0.48% to $62.82 per barrel.
Spot gold retreated from a four-week high and last stood at $3,358 an ounce.
Reporting by Rae Wee and Linda Pasquini Editing by Jacqueline Wong, Kate Mayberry, Amanda Cooper, Frances Kerry and Chizu Nomiyama
