(Adds dealer quotes and details throughout, updates prices) * Canadian dollar falls 0.4% against the greenback * Price of U.S. oil decreases 1% * Canadian bond prices rise across a flatter yield curve * 10-year yield drops below yield on 3-month T-bill By Fergal Smith TORONTO, May 13 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday as investors worried about the damage to the global economy from an escalating trade war between the United States and China. Wall Street took a pounding after Beijing defied Washington by announcing retaliatory tariffs on $60 billion in U.S. goods in the latest salvo in the two countries' increasingly belligerent trade dispute, sending investors fleeing equities for less risky assets. Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of capital or trade. "It is a decidedly risk-off tone in the markets," said Scott Lampard, head of global markets at HSBC Bank Canada. "The record jobs number from Canada certainly seems to be a distant memory right now." Data on Friday showed that the Canadian economy added 106,500 jobs in April, providing a timely boost for Prime Minister Justin Trudeau, who trails in opinion polls less than half a year before the October general election. Still, Trudeau's strategy to prioritize spending on the middle class at the beginning of his four-year term will not keep growth humming ahead of the election, some economists said. Oil prices fell as the negative turn in the U.S.-Chinese trade talks spooked investors, who had sent oil higher in early trade on concerns about reports of sabotage attacks on tankers in the Middle East that could disrupt supplies. U.S. crude oil futures settled 1 percent lower at $61.04 a barrel. At 3:49 p.m. (1949 GMT), the Canadian dollar was trading 0.4% lower at 1.3470 to the greenback, or 74.24 U.S. cents. The currency, which on Friday touched a nine-day high at 1.3381, traded in a range of 1.3420 to 1.3483. Speculators have cut their bearish bets on the Canadian dollar for the third straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The 10-year rose 68 Canadian cents to yield 1.661%. The 10-year yield dropped 7.2 basis points more than the yield on the 3-month T-bill to leave a spread of 1.4 basis points in favor of the shorter-dated maturity, as the curve inverted. Canada's inflation report for April is due on Wednesday. (Reporting by Fergal Smith; Editing by Nick Zieminski ; Editing by Peter Cooney; Editing by Peter Cooney)
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