* European markets tumble 2.5%

* Nikkei closes almost 13% lower, Nasdaq futures dive 5%

* Circuit breakers tripped by torrent of selling

* Markets see 50 bps Fed cut in Sept, maybe even earlier

* Safe haven Swiss franc and yen surge

LONDON/SYDNEY, Aug 5 (Reuters) - Stock markets tumbled on Monday, with Japanese shares at one point exceeding their 1987 "Black Monday" loss, as fears of a U.S. recession sent investors fleeing from risk while wagering that rate cuts would be needed to rescue growth.

The safe haven yen and Swiss franc surged, as crowded carry trades unraveled, sparking speculation that some investors were unloading profitable trades to get money to cover losses elsewhere. Such was the torrent of selling that circuit breakers were triggered on stock exchanges across Asia.

Japan's benchmark Nikkei average closed 12.40% lower at 31,458.42, its largest one-day fall since October 1987, while the broader Topix lost 12.48% to 2,220.91.

European shares fell to near six-month lows amid a global selloff in equities on fears of a slowdown in U.S. economic growth, with only a handful of stocks trading in the green.

The pan-European STOXX 600 index was down 2.6% at 487.15 points, its lowest since Feb. 13.

The Euro STOXX volatility index jumped 5.7 points to 30.26, its highest since March 2023.

Germany's DAX, France's CAC 40, Britain's FTSE and Spain's IBEX 35 all fell more than 2%.

Treasury bonds were in demand, with U.S. 10-year yields hitting at one point 3.723%, the lowest since mid-2023.

A worryingly weak July payrolls report on Friday saw markets price in a 78% chance the Federal Reserve will not only cut rates in September, but ease by a full 50 basis points. Futures imply 122 basis points of cuts in the 5.25-5.5% funds rate this year, and rates of around 3.0% by the end of 2025. "Signs of emerging weakness in the U.S. economy are evident, with negative indicators from hiring, retail sales, and PMI reports," said Bruno Schneller, managing partner at Erlen Capital Management.

Schneller noted, however, that economic data like GDP and trade remained stable while the prospect of autumn U.S. rate cuts approached.

Analysts at Goldman Sachs also noted the Fed's ability to re-instill market optimism, estimating a 25% likelihood of a U.S. recession.

Analysts at JPMorgan were even more bearish, assigning a 50% probability to a recession.

"Now that the Fed looks to be materially behind the curve, we expect a 50 bp cut at the September meeting, followed by another 50 bp cut in November," said economist Michael Feroli.

"Indeed, a case could be made for an inter-meeting easing, especially if the data soften further."

SEEKING SAFE HARBOURS

Investors will get a read on employment in the service sector from the ISM non-manufacturing survey later on Monday and analysts are expecting a rebound to 51.0 after June's unexpected slide to 48.8.

This week has earnings from industrial bellwether Caterpillar and media giant Walt Disney, which will give more insight into the state of the consumer and manufacturing. Also reporting are healthcare heavyweights such as weight-loss drugmaker Eli Lilly.

The huge drop in Treasury yields had also overshadowed the U.S. dollar's usual safe-haven appeal and dragged the greenback down 0.5% against a basket of other major currencies.

The dollar fell by as much as 3.28% against the Japanese yen to 141.675, while the euro dived 2.65% to 155.63 . The single currency rose against the dollar to $1.0945.

The Swiss franc was a major beneficiary of the rush from risk, with the dollar falling around 1% and hovering at six-month lows of 0.8500 francs.

"The shift in expected interest rate differentials against the U.S. has outweighed the deterioration in risk sentiment," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

"If the recession narrative takes hold in earnest, we would expect that to change, and the dollar to rebound as safe-haven demand becomes the dominant driver in currency markets."

Investors have also increased wagers other major central banks will ease more aggressively, with the European Central Bank now seen cutting by 67 basis points by Christmas.

In commodity markets, gold lost some of its safe haven appeal, around 1% at $2,419 an ounce.

Oil prices eased as concerns about global energy demand offset worries about the potential impact to supply from a widening conflict in the Middle East.

Brent fell 137 cents to $75.44 a barrel, while U.S. crude lost 193 cents to $72.07 per barrel.

(Reporting by Nell Mackenzie and Wayne Cole; Editing by Amanda Cooper, Kirsten Donovan and Christina Fincher)