GLOBAL MARKETS-Dollar, global stocks tumble as Trump launches Europe tariff bombshell

Updates throughout

By Naomi Rovnick

LONDON May 23 (Reuters) - Global stocks and the dollar tumbled on Friday after U.S. President Donald Trump unleashed his latest unexpected trade bombshell by recommending 50% tariffs on European Union imports from June 1.

An index tracking the U.S. currency against major peers =USD dropped 0.5% and headed for a 1.5% weekly drop. Futures contracts tracking Wall Street's benchmark S&P 500 share index ESc1 fell 1.4% and those on the tech-focused Nasdaq 100 NQc1 lost 1.9%.

European equity gauges also fell sharply, with Germany's DAX GDAXI losing 1.6%, Britain's FTSE 100 .FTSE dropping 0.8% and the regionwide Stoxx 600 share index 1.9% lower.

Government bonds in the U.S. and Europe rallied, however, as the assets suddenly found favour from haven buyers after sustaining heavy pressure this week from rising concerns about Trump's tax cuts and the White House's ballooning debt pile.

"The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with," Trump said in a post on his Truth Social network.

He earlier made a separate post announcing that Apple AAPL.O would be hit with 25% tariffs if phones sold in the U.S. were not made within its borders, sending the iPhone maker's shares down almost 4% in premarket trading.

TARIFF SCARES, BUDGET WOES

This was just the latest major event in a rollercoaster week for global markets that began with Moody's downgrading the U.S. credit rating before the U.S. House of Representatives narrowly approved Donald Trump's sweeping tax cuts on Thursday.

The new fiscal package Trump has dubbed his "big, beautiful bill", is expected to add almost $4 trillion to the federal government's $36 trillion debt pile.

Yields on long-dated Treasuries US30YT=RR hit 19-month highs on Thursday before dropping below 5% again on Friday in response to fresh tariff fears.

The benchmark 10-year yield US10YT=RR also declined by 9 basis points to 4.47%, while the price of gold XAU=, which lures traders when economic anxiety rises and has surged in recent months, rose a further 1.7% to $3,350 an ounce.

Canadian stock futures SXFcv1 fell 1% and the euro EUR=EBS also pared strong recent gains.

Netwealth CIO Iain Barnes said he was keeping his portfolios broadly diversified and neutral on market risk for now and expected bond yields and investor sentiment to remain volatile.

"The uncertainty is what (the tax cuts) do to the aggregate mix of the national finances and whether or not that, in itself, becomes a source of volatility," he said.

He was also cautious on U.S. stocks and corporate credit, he said.

Brent crude priced for delivery in a month's time LCOc1 fell 1.1% to $62.75 a barrel.

Germany's rate-sensitive 2-year bond yield fell 10 bps to 1.73%, while benchmark 10-year Bund yield fell 9 bps to 2.55%. DE10YT=RR, DE2YT=RR.

Japan's safe-haven yen was the biggest currency gainer on Friday JPY=EBS, strengthening 0.9% to 142.77 per dollar.

The euro EUR=EBS lost 0.6% to 161.43 yen.

(Reporting by Naomi Rovnick; Additonal reporting by Stella Qiu in Sydney; Editing by Amanda Cooper and Alex Richardson)

((naomi.rovnick@thomsonreuters.com))