* Global stocks fall as weak US data spurs recovery fears
* Oil slips 3 pct to near $77 a barrel on slack economy
* U.S. dollar gains as stocks falter after Thursday rally
* Government debt jump as mixed data fuels recovery doubts
(Updates prices, adds volatility index)
By Herbert Lash and Al Yoon
NEW YORK, Oct 30 (Reuters) - U.S. markets ended a wild week
with a bust on Friday as serious questions about big banks once
again haunted investors who increasingly concluded that the
7-month stock surge is over.
Measures of risk soared and Wall Street's fear gauge, the
CBOE Volatility Index <.VIX>, posted its biggest one-day
percentage move in 11 months with a 25 percent jump.
Havens like U.S. Treasuries and the dollar shot higher
while risky assets such as stocks and oil plunged.
Equities in U.S. and Europe slumped after reports showed
American consumers cut spending in September while sentiment
turned lower this month. The slide followed the strongest day
in three months for some U.S. indexes, suggesting investors are
skittish and have little bearing on an economic recovery.
The U.S. dollar rebounded after steep losses on Thursday,
when data that showed the U.S. economy grew surprisingly fast
in the third quarter.
But Friday's data gave a mixed picture as factory activity
in the U.S. Midwest expanded for the first time in more than a
year. The result was a renewed safety bid that helped lift
government debt prices on both sides of the Atlantic.
Gold prices slipped below $1,040 per ounce in Europe before
paring losses as the dollar extended gains against a basket of
currencies, while oil prices fell 3.5 percent to near $77 a
barrel as the bearish data dented investors' confidence.
"Confidence still strikes me as shockingly low," said Jeff
Kleintop, chief market strategist at LPL Financial in Boston.
"Consumers are still very pessimistic, and that is evident
in individual investors' hesitancy to embrace this rally."
Major U.S. and European stock indexes slipped more than 2
percent on the day and racked up declines for October.
The pan-European FTSEurofirst 300 <> index of top
shares posted its biggest monthly decline in eight months, and
the Nasdaq was headed to its first monthly decline in eight.
U.S. stocks had gained almost 60 percent from March lows,
prompting managers to protect returns.
Twenty-two percent of mutual funds have an Oct. 30 fiscal
year-end, more than any other month except December, according
to Credit Suisse.
"The market's had a huge run-up, and hedge funds and money
managers are coming into crunch time," said Tom Alexander, head
of Alexander Trading in Savannah, Georgia.
"Those that had these huge gains may have a finger on the
trigger, locking in some of those gains."
At 2:48 p.m. (1848 GMT), the Dow Jones industrial average
<> fell 232.01 points, or 2.33 percent, at 9,730.57. The
Standard & Poor's 500 Index <.SPX> slid 27.36 points, or 2.57
percent, at 1,038.75. The Nasdaq Composite Index <>
dropped 48.06 points, or 2.29 percent, at 2,049.43.
The FTSEurofirst 300 declined 2.11 percent at 976.46.
Bund futures rose to their highest in one and a half weeks
as the steep equity declines helped bolster demand for
lower-risk government debt. U.S. government debt also rose.
With the economy still fragile a year after the global
credit crisis, the Federal Reserve will likely stick to its
easy borrowing policy and near-zero interest rate target after
policymakers convene next week, analysts said.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
25/32 in price, pushing the yield down about 0.1 percentage
point to 3.40 percent.
Positive manufacturing data from the Midwestern U.S. failed
to dent dollar buying and traders said this may be partially
due to month-end flows into the U.S. currency related to
foreign portfolios. The dollar is a haven to investors who,
fearing economic weakness, shed risky positions.
The dollar climbed versus a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.54 percent at 76.33.
The euro <EUR=> fell 0.73 percent to $1.4723. Against the
yen, the dollar <JPY=> declined 1.58 percent at 89.97.
U.S. crude oil <CLc1> fell $2.79 to $77.08 a barrel. Spot
gold <XAU=> fell $3.80 to $1,040.70 an ounce.
Asian stocks bounced back from their biggest drop in two
months. The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> rose 2 percent, but later pared gains, up about
0.9 percent. The Nikkei <> in Tokyo climbed 1.5 percent.
(Additional reporting by Leah Schnurr and Chuck Mikolajczak;
Editing by James Dalgleish)
