* Futures down: Dow 0.7 pct, S&P 0.74 pct, Nasdaq 0.6 pct
By Medha Singh
May 29 (Reuters) - U.S. stock index futures fell on Tuesday led by bank stocks as investors moved to low-risk assets due to a deepening political crisis in Italy and a leadership challenge in Spain.
European financial markets saw a second day of heavy selling due to fear that repeat elections - which now seem inevitable in the euro zone's third largest economy - may become a de facto referendum on Italian membership of the currency bloc and the country's role in the European Union.
On Monday, Italy's president set the country on a path to fresh elections by appointing a former International Monetary Fund official as interim prime minister with the task of planning for snap polls and passing the next budget.
Adding to the uncertainty, Spanish Prime Minister Mariano Rajoy will face a vote of confidence on Friday as corruption convictions to dozens of people linked to his political party threatened his six-year rule.
The U.S. 10-year Treasury yield, one of the main safe havens for capital at times of global political stress, fell to the lowest level since early April at 2.8477 percent.
Shares of major U.S. lenders, which track the benchmark yield, also slipped. Shares of Bank of America, JPMorgan and Goldman Sachs fell between 1.2 percent and 1.6 percent.
"The kick-off to a shortened trading week is looking ugly as Italy's political woes weigh heavily on the global markets," noted Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
"A crisis of confidence for the euro seems almost inevitable, which is fortifying the greenback and sending bond yields lower as the safety trade overrules."
At 7:32 a.m. ET, Dow e-minis were down 174 points, or 0.7 percent. S&P 500 e-minis were down 20 points, or 0.74 percent and Nasdaq 100 e-minis were down 41.75 points, or 0.6 percent.
At these levels, the S&P 500 is set to open below its 100-day moving average, a key technical level.
U.S. President Donald Trump said on Tuesday meetings were being held to set up a summit with North Korea and confirmed that a top North Korean official was en route to New York. The move is the latest indication that an on-again-off-again summit with Trump may go ahead.
St. Louis Fed President James Bullard said the Federal Reserve will find it difficult to raise interest rates beyond the settings of its Japanese and European counterparts, which are still pursuing accommodative policy.
U.S. interest rates may have already hit the "neutral" level that neither encourages nor discourages economic activity and that the Fed had enough tools and policy options to respond if the U.S. economy falls into a recession, Bullard said while at a seminar in Tokyo.
Data for May consumer confidence index, due at 10:00 a.m., is likely to show a reading of 128.0. (Reporting by Medha Singh in Bengaluru; Editing by Arun Koyyur)