The yen and gold gained as caution prevailed and ahead of testimony from the former head of the FBI, a British election and the European Central Bank's next move, which all happen on Thursday.

"We have risk events piling up," said Blake Gwinn, U.S. rates strategist at NatWest Markets in Stamford, Connecticut. "We'll be very focused on what happens on Thursday, but it might end up being a dud."

Leading Arab powers including Saudi Arabia, Egypt and the United Arab Emirates cut ties with Qatar on Monday, accusing it of supporting Islamist militants and Iran.

U.S. crude rose 1.35 percent to $48.04 per barrel and Brent was last at $49.94, up 0.95 percent on the day.

Wall Street closed lower for a second day after both European and Asian stocks dropped during their sessions.

The largest weight on the S&P 500 was Amazon (>> Amazon.com), down 0.8 percent. Walmart (>> Wal-Mart Stores) fell 1.7 percent to $78.93 after Amazon said it would offer its Prime subscription service at a discount to U.S. customers on government aid, taking aim at a piece of Walmart's customer base.

The Dow Jones Industrial Average <.DJI> fell 47.81 points, or 0.23 percent, to 21,136.23, the S&P 500 <.SPX> lost 6.77 points, or 0.28 percent, to 2,429.33 and the Nasdaq Composite <.IXIC> dropped 20.63 points, or 0.33 percent, to 6,275.06. [nL3N1J34CK]

On what BayernLB analysts called "Super Thursday", British voters will also go to polls in an increasingly unpredictable general election, the European Central Bank is due to meet and former FBI director James Comey will testify before Congress.

"Once these events pass, we may have a little more clarity and therefore see a little less caution in the markets," said Craig Erlam, a market analyst for OANDA securities.

The pan-European FTSEurofirst 300 index <.FTEU3> lost 0.62 percent and MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.28 percent.

Investors piled into gold, U.S. Treasuries and German government bonds, among the world's safest assets. German 10-year borrowing costs dropped to six-week lows.

U.S. 10-year Treasury yields, last at 2.145 percent, dropped as low as 2.129 percent, a seven-month low . Gold briefly touched a high of $1,295.97, prices not seen since November.

A run of weaker-than-expected U.S. data dragged bond yields lower even though the Federal Reserve is widely expected to raise U.S. interest rates a quarter point next week.

Sterling turned flat ahead of Thursday's general election. British Prime Minister Theresa May looks on course to increase her parliamentary majority, a poll showed, shortly after another survey suggested the race with the Labour Party was neck and neck.

The dollar fell to a more than six-week low against the yen and was at its weakest since the November U.S. election against a basket of other world currencies <.DXY>.

On Thursday, reports suggest former FBI chief Comey plans to talk about conversations in which U.S. President Donald Trump allegedly pressured him to drop his investigation into former national security adviser Mike Flynn, who was fired for failing to disclose conversations with Russian officials.

The Mexican peso posted a second day of gains after U.S. and Mexican governments reached a new preliminary agreement to shift their sugar trade mix.

(To view a graphic on 'World FX rates in 2017' click http://tmsnrt.rs/2egbfVh)

(To view a graphic on 'Global bonds dashboard' click http://tmsnrt.rs/2fPTds0)

(To view a graphic on 'Global market cap' click http://reut.rs/2mcp7T1)

(To view a graphic on 'Emerging markets in 2017' click http://tmsnrt.rs/2ihRugV)

(Additional reporting by Abhinav Ramnarayan in London, Richa Naidu in Chicago, Anya George Tharakan in Bengaluru and Richard Leong, Saqib Iqbal Ahmed, Rodrigo Campos and Jessica Resnick-Ault in New York; Editing by David Gregorio)

By Hilary Russ

Stocks treated in this article : Wal-Mart Stores, Amazon.com