(Updates at 1455 GMT)

By Harry Robertson and Stefano Rebaudo

Aug 2 (Reuters) - German government bond yields tumbled

on Friday to their lowest level in more than a year as investors

snapped up sovereign debt after weak U.S. economic data raised

fears for global growth and caused stocks to fall sharply.

Data on Friday showed the U.S. economy added 114,000 jobs in

July, down from 179,000 in June and well below the 175,000

economists expected. The unemployment rate rose to 4.3%, from

4.1%, raising market expectations for Federal Reserve interest

rate cuts this year.

Germany's two-year bond yield, which is sensitive

to European Central Bank rate expectations, fell more than 12

basis points (bps) to 2.326%, its lowest since March 2023.

Germany's 10-year bond yield, the benchmark for

the euro zone, hit 2.149%, the lowest since January. It was last

down 8 bps at 2.168%.

The yield, which moves inversely to the price, was set to

end the week 24 bps lower, the biggest fall since mid-June.

Torsten Slok, chief economist at Apollo Global Management,

said he now expects the Fed to cut rates in September. He

previously expected the central bank to hold rates for all of

2024.

"With inflation coming down and the labour market

softening we now think the Fed will cut rates 25 bps in

September," he said. "But with GDP in the second quarter coming

in at 2.8%, the economy is not crashing."

Tensions in the Middle East and Thursday's Bank of England

interest rate cut also burnished the appeal of bonds, although

the debt of euro zone countries that are seen as riskier

investments, such as Italy, fared less well.

Data on Thursday showed U.S. jobless claims rose more than

expected last week to 249,000, the highest since August 2023.

In addition, a measure of U.S. manufacturing activity

dropped to an eight-month low in July amid a slump in new

orders.

Stocks dropped around the world on Friday, with a broad

pan-European index down around 2.7% and the U.S. S&P

500 2.5% lower.

Concerns about the global economy led riskier government

bonds to underperform their peers, with the Italian and French

yield spreads versus German bonds widening respectively to 146

basis points (bps), the highest in almost a month,

and to 78 bps, the highest since last month's

French election.

"We are seeing strong moves across major markets," said

Emmanouil Karimalis, macro rates strategist at UBS.

"It is a combination of several factors: the BoE cut has set

a more bullish tone this week, while markets are also increasing

their expectations for a Federal Reserve cut," he said.

"The weakness in the stock market, escalating geopolitical

tensions in the Middle East, and a slowdown in European

government bond supply in August are all supportive factors for

European bonds."

Italy's 10-year bond yield fell 2 bps to 3.626% while

France's was down 4 bps at 2.957%.

Money markets priced in almost 70 bps of further European

Central Bank rate cuts in 2024, from about 50 bps a week ago

.