GLOBAL MARKETS-Stocks, euro slide on fears about recovery

                                
 * Global stocks slump on concerns about economic recovery
                                
 * Oil falls below $67 barrel as Europe debt worries fester
                                
 * Bonds rally on flight to safety on U.S. data
                                
 * Euro retains selling bias, falls 0.6 percent vs dollar
 (Updates with close of European markets)
                                
 By Herbert Lash
                                
 NEW YORK, May 20 (Reuters) - Global stocks and the euro
slid on Thursday, with U.S. stocks down 10 percent from this
year's highs, as worries mounted that Europe's debt crisis
could crimp world economic growth.
                                
 Crude oil fell below $67 a barrel to its lowest in nearly
eight months on concerns about weak demand, while government
debt prices soared as falling equity markets and an unexpected
jump in new U.S. jobless claims drove a flight to safety. For
details see [ID:nLDE64J1GY] [ID:nN20338649]
                                
 Fears that other euro zone countries will follow Germany's
move on Tuesday to ban short selling in some stocks and bonds
propelled a widespread aversion to risk.
                                
 Germany said restoring confidence in the euro was its "top
priority," while a Federal Reserve official said Europe's debt
crisis poses a "potentially serious" risk to the U.S. recovery
as it threatens global credit markets and commerce.
[ID:nSGE64J05H] [ID:nN20148593]
                                
 "Investor uncertainty is leading to a flight to quality and
safe havens," said Peter Dixon, economist at Commerzbank.
                                
 "Dumping stocks seems sensible with so much uncertainty on
the macro environment, and all fundamental ways of looking at
value are out of the window."
                                
 Markets were volatile. Traders pointed to purchases of
10-year Treasury notes by an Asian buyer and to a huge seller
of e-minis, a futures contract providing holders exposure to
the benchmark Standard & Poor's 500 Index <.SPX>.
                                
 The Chicago Board Options Exchange Volatility index <.VIX>,
often referred to as Wall Street's fear gauge, rose as much as
28 percent to its highest intraday level since April 2009.
[ID:nN20254844]
                                
 The Reuters-Jefferies CRB index  <.CRB>, a global benchmark
for commodities, slumped to 8-1/2 month lows.
                                
 The euro <EUR=> was down 0.56 percent at $1.2358.
                                
 MSCI's all-country world equity index <.MIWD00000PUS> fell
2.4 percent, while its emerging markets index <.MSCIEF> was off
almost 3.0 percent.
                                
 At 12:30 p.m., the Dow Jones industrial average <.DJI> was
down 279.85 points, or 2.68 percent, at 10,164.52. The Standard
& Poor's 500 Index <.SPX> was down 32.96 points, or 2.96
percent, at 1,082.09. The Nasdaq Composite Index <.IXIC> was
down 75.54 points, or 3.29 percent, at 2,222.83.
                                
 The S&P 500 slipped into negative territory for the year on
Wednesday and fell more than 10 percent from its April high,
signifying a correction.
                                
 European shares slipped for a second session, as financial
stocks were hit hard.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
finished down 2.2 percent at 974.80 points.
                                
 An apparent lack of unity among euro-zone leaders on
tackling debt problems triggered U.S. worries about additional
regulation.
                                
 "You hear the cliche the markets hate uncertainty, and
there is a whole hill of it over there right now," said Kevin
Kruszenski, head of listed trading at KeyBanc Capital Markets
in Cleveland.
                                
 Interbank dollar and euro funding costs rose, with a key
dollar lending rate rising to a 10-month high, as demand for
the U.S. currency remained solid in a jittery market.
 [ID:nLDE64J1HP]
                                
 German 10-year government bond yields hit a record low and
euro zone government bond futures extended gains to a fresh
session high after the U.S. labor market data suggested the
still feeble recovery has hit a stumbling block.
                                
 The number of U.S. workers filing new applications for
unemployment insurance unexpectedly rose last week for the
first time since early April, the Labor Department said.
[ID:nN20125298]
                                
 The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
39/32 in price to yield at 3.23 percent.
                                
 The U.S. dollar rose against a basket of major currencies,
with the Dollar Index <.DXY> up 0.09 percent at 86.47.
                                
 Against the yen, the dollar <JPY=> was down 1.99 percent at
89.81.
                                
 Oil extended early losses on the U.S. jobless data and
slide in global equity markets.
                                
 U.S. light sweet crude oil <CLc1> fell $2.91 to $66.96 a
barrel.
                                
 Spot gold prices <XAU=> fell $1.20 to $1189.50 an ounce.
                                
 Worries over the euro zone hammered Asian stocks, driving
MSCI's index of Asia-Pacific shares outside of Japan
<.MIAPJ0000PUS> down 2.4 percent to an eight-month low.
                                
 Japan's Nikkei average <.N225> closed at a new three-month
low despite data that showed Japan's economy grew 1.2 percent
in the first quarter, outpacing its euro zone and U.S. peers.
[ID:nTOE64J003]
 (Reporting by Nick Olivari and Ellen Freilich in New York and
Emma Farge, Ian Chua and William James in London; Writing by
Herbert Lash; Editing by Kenneth Barry)