Shares fall but pare losses on U.S. data, dollar rebounds

NEW YORK (Reuters) - Global equity markets tumbled again on Thursday as investors continued to worry about world growth and on fears that Europe's debt crisis was waking up from a two-year siesta, while crude oil slumped to a four-year low.

But new data indicating strength in the U.S. economy helped major U.S., European and pan-world stock indexes pare losses that had exceeded 1 percent earlier and cut the bid for safe-haven government debt, driving up yields.

Data showing that the number of Americans filing new claims for jobless benefits fell to a 14-year low last week and industrial output rose sharply in September also helped the dollar recover.

But the data was not enough to reverse the tide of bearish sentiment.

"When you get in a mode like we are in now, where the market is clearly bearish, investors are somewhat fearful, they tend to focus more on the negatives than the positives, which is why they are ignoring this jobless claims number," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

Early reports for third-quarter U.S. corporate results were beating expectations, but earnings are backward looking and the market is always forward looking, Frederick said.

Sixty-three companies in the S&P 500 have reported results, with 65.1 percent beating expectations, above a 20-year average but slightly lower than the past four quarters, Thomson Reuters data show. The blended revenue growth estimate is 4.1 percent.

MSCI's all-country world index fell 0.8 percent, while the pan-European FTSEurofirst 300 index fell 0.93 percent to 1,240.22.

The Dow Jones industrial average fell 82.98 points, or 0.51 percent, to 16,058.76. The S&P 500 slid 11.01 points, or 0.59 percent, to 1,851.48, and the Nasdaq Composite lost 32.00 points, or 0.76 percent, to 4,183.32.

The dollar mostly recovered on the view that Wednesday's sell-off was overdone given the relative strength of the U.S. economy and the Federal Reserve's commitment to tighten monetary policy.

A disappointing auction of Spanish debt and data showing that deflation hit five peripheral euro zone countries in September underscored the relative health of the U.S. economy and the divergent outlook for Fed and European Central Bank policy.

The euro was last down 0.49 percent against the dollar at $1.2773. The euro hit an 11-month low against the yen, at 134.16 yen.

The dollar was last up 0.26 percent against the yen at 106.18 yen.

Brent crude recovered, while U.S. crude was lower. Brent has lost more than 28 percent since June. Losses have accelerated in October on signs the Organization of the Petroleum Exporting Countries has no plan to cut output.

Brent crude for November delivery rose 17 cents to $83.95 a barrel. Earlier it had dropped to $82.60 a barrel, the lowest since November 2010.

U.S. crude was down 56 cents at $81.22 a barrel.

U.S. Treasuries prices fell. Benchmark 10-year notes were down 13/32 in price to yield 2.1375 percent.

(Reporting by Herbert Lash in New York; Additional reporting by Marc Jones in London; Editing by Leslie Adler)