Global 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 slumber, 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 mostly based on Europe, where the outlook for slowing economic growth eroded confidence that the European Central Bank could avert another debt crisis in the euro zone.

"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.

Though early reports for third-quarter U.S. corporate results were beating expectations, 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 <.MIWD00000PUS> fell 0.38 percent to 391.74, while the pan-European FTSEurofirst 300 <.FTEU3> index closed down 0.49 percent at 1,245.78.

The Dow Jones industrial average <.DJI> fell 66.38 points, or 0.41 percent, to 16,075.36. The S&P 500 <.SPX> slid 6.49 points, or 0.35 percent, to 1,856 and the Nasdaq Composite <.IXIC> lost 24.18 points, or 0.57 percent, to 4,191.14.

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 0.20 percent against the dollar at $1.2810. The euro hit an 11-month low against the yen, at 134.16 yen.

The dollar was last up 0.12 percent against the yen at 106.03 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 27 cents to $84.05 a barrel. Earlier it had dropped to $82.60 a barrel, the lowest since November 2010.

U.S. crude was down 12 cents at $81.66 a barrel.

U.S. Treasuries prices fell. Benchmark 10-year notes were down 17/32 in price to yield 2.1533 percent.

In Europe, Greek government bonds were the hardest hit, with 10-year yields rising to nearly 9 percent, while Spain missed its target at a bond auction due to weak demand from investors.

Yields on 10-year German Bunds rose to 0.819 percent, after slumping to a new low of 0.716 percent.

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

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