Portugal Colonial - Dollar dives on Trump's new trade threat

Stock markets in the United States, Europe and Asia all swooned on the double whammy of returning trade uncertainty and geopolitical volatility, while Boeing's share price slumped sharply in the wake of a 787 Dreamliner crash in India.

The dollar lost one percent against the euro, falling to its lowest point in more than three years against the European single currency.

"Trump has done it again. The US president has rattled markets with fresh threats of unilateral tariff rates on several trading partners," said Fawad Razaqzada, market analyst at FOREX.com.

"Investors are now asking questions... and that's before considering other risks that include valuations, bond market troubles, and a potential military conflict between Iran and Israel," he said.

Trump on Wednesday said he would be sending letters within the next two weeks to other countries' governments to announce unilateral US levies on their exports to America.

"This is the deal, you can take it or leave it," Trump told reporters.

The return to trade belligerence eclipsed any optimism that had emerged from a putative agreement between the United States and China on Tuesday to modestly de-escalate trade tensions.

It also left the European Union staring down the barrel of 50-percent tariffs -- at least -- when a pause on them ends on July 9, without any sign so far of Brussels and Washington close to reaching a trade agreement.

Markets were also following reports that Israel was poised to launch airstrikes on Iran -- along with Trump saying he was now "less confident" that talks with Tehran would end up with it rolling back its nuclear programme.

The United States is removing non-essential personnel and military dependants from the Middle East, after Iran warned it would target US military bases in the region if conflict broke out.

Iran, meanwhile, is doubling down, vowing to "significantly" boost uranium enrichment after the UN's nuclear watchdog said Tehran has breached its obligations.

The finding could lead to UN sanctions on Iran suspended under the 2015 nuclear deal -- now moribund -- being restored under a "snapback" mechanism that applies in October.

Iran is one of the top oil producing nations in OPEC. Oil prices, which had initially jumped on Wednesday on the heightened tensions, flipped direction on Thursday as investors and analysts discounted reports of imminent Israeli strikes.

"A solo Israeli strike on Iran's nuclear program without US acknowledgement or support is highly unlikely" and carried a "considerable" risk of miscalculation, said analysts at Eurasia Group, although they did say the UN nuclear agency's censure "adds to (the) escalatory environment".

In the end, the "threat of an Israeli attack gives the US more leverage during talks," they surmised.

In New York share trading, Boeing dropped more than five percent following news that a London-bound Air India plane -- a Boeing 787 -- carrying 242 people had crashed in Ahmedabad.

The US planemaker declared itself ready to support Air India following the crash, the first involving a Dreamliner.

- Key figures at around 1330 GMT -

New York - Dow: DOWN 0.5 percent at 42,632.72 points

New York - S&P 500: DOWN 0.3 percent at 6,005.89

New York - Nasdaq Composite: DOWN 0.2 percent at 19,571.66

London - FTSE 100: FLAT at 8,863.75 points

Paris - CAC 40: DOWN 0.5 percent at 7,738.42

Frankfurt - DAX: DOWN 0.8 percent at 23,751.71

Tokyo - Nikkei 225: DOWN 0.7 percent at 38,173.09 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 24,035.38 (close)

Shanghai - Composite: FLAT at 3,402.66 (close)

Euro/dollar: UP at $1.1600 from $1.1489 on Wednesday

Pound/dollar: UP at $1.3604 from $1.3545

Dollar/yen: DOWN at 143.30 yen from 144.62 yen

Euro/pound: UP at 85.27 pence from 84.79 pence

Brent North Sea Crude: DOWN 1.6 percent at $68.65 per barrel

West Texas Intermediate: DOWN 1.6 percent at $67.04 per barrel

P.L.Madureira--PC