(Refiles to change story link in paragraph 2, delete extraneous number after last paragraph)
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
By Sinéad Carew
NEW YORK, May 6 (Reuters) - Stocks around the world tumbled on Monday and oil prices slumped after U.S. President Donald Trump threatened to raise tariffs on China, triggering an investor exodus from risky assets.
Trump said on Sunday he would raise tariffs on $200 billion worth of Chinese goods this week and target hundreds of billions more soon. On Friday, he had cited good progress in trade talks and praised his relationship with Chinese President Xi Jinping.
U.S. Treasury yields held at lower levels as investors favored the safety of low-risk government bonds over stocks and other risky assets due to the increased trade tension between China and the United States.
In U.S. equities trading, the three major indexes fell after declines in Europe and China, where the Shanghai SE Composite had its biggest one-day percentage drop since February 2016.
"The probability of a no-deal scenario is now elevated and markets will have to price that accordingly," said Mona Mahajan, U.S. investment strategist at Allianz Global Investors, New York.
"Our base case remains that there's still a more than 50 percent chance a deal ultimately does occur, but now with more market volatility and more contentiousness."
Trump's recent decision to walk away from talks with North Korea is likely at the back of investors' minds, according to Mahajan. But this fear is being balanced out by a statement from China's foreign ministry on Monday that a delegation was still preparing to go to United States for trade talks.
"That's what's keeping markets from moving down further. People are realizing that if talks are still continuing there's a chance that this escalation can once again de-escalate," she said.
The Dow Jones Industrial Average fell 260.73 points, or 0.98%, to 26,244.22, the S&P 500 lost 31.1 points, or 1.06%, to 2,914.54 and the Nasdaq Composite dropped 102.97 points, or 1.26%, to 8,061.02.
The pan-European STOXX 600 index lost 1.15% and MSCI's gauge of stocks across the globe shed 1.11%. Japanese and London markets were both closed for holidays.
Benchmark 10-year U.S. Treasury notes last rose 11/32 in price to yield 2.4908%, from 2.53% late on Friday.
In currency trading, the U.S. dollar firmed against most major currencies but lost ground to the Japanese yen as investors turned to safe-haven currencies after the Trump tweets.
"After weeks of talks and suggestions from the U.S. administration that a deal was close, the sudden ramping up of trade tensions caught investors by surprise," Shaun Osborne, chief FX strategist at Scotiabank in Toronto, said in a note.
"The FX markets are reacting in a classic risk-off manner, with the USD trading mainly higher."
The dollar index rose 0.1%, with the euro down 0.08% to $1.1191.
The Japanese yen weakened 0.28% versus the greenback at 110.86 per dollar.
U.S. crude fell 0.77% to $61.46 per barrel. Brent crude futures rose 18 cents to $71.03 a barrel, a 0.3 percent gain, by 10:20 a.m. EDT (1420 GMT). U.S. West Texas Intermediate (WTI) crude futures fell 5 cents to $61.89 a barrel, a 0.1 percent loss.
Additional reporting by Saqib Iqbal Ahmed, Richard Leong and Stephanie Kelly in New York, Saikat Chatterjee and Virginia Furness in London; Editing by Larry King and Dan Grebler