* Equities fall on worries over fledgling economic recovery
* Oil dips below $81 a barrel as dollar firms, stocks fall
* U.S. Treasury prices sag on pending supply, rate worries
* Sterling falls broadly after poor UK data, dollar gains (Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 23 (Reuters) - The U.S. dollar rose and global stocks fell on Friday as energy shares followed crude prices lower and investors worried about the pace of a fledgling U.S. economic recovery.
The Dow Jones industrial average closed below the 10,000 mark, as weak results from industrials overshadowed robust earnings from bellwethers in technology.
The dollar and euro soared against sterling after data showed Britain was still mired in recession, with the economy shrinking 0.4 percent in the third quarter, which stunned investors who had expected a return to growth. For more see [ID:nN23107079].
Sterling plunged nearly three cents against the dollar and notched its biggest one-day decline against the euro in six months as traders bet the Bank of England was more likely to expand its quantitative easing program to secure a recovery.
The euro
Oil stocks reversed early gains as U.S. crude futures
"Any time the dollar shows signs of life, the stock market goes down. There's a flight to safety," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
"The (weak) UK GDP gave strength to the dollar. And when the dollar is up, oil falls."
World stocks fell, with the MSCI All-Country Word Index <.MIWD00000PUS> losing 0.76 percent.
Weak industrial sector earnings also made investors
question the recovery's strength, which overshadowed robust
results from technology heavyweights Microsoft Corp
Shares of Burlington Northern Santa Fe Corp
The Dow Jones industrial average <.DJI> closed down 109.13 points, or 1.08 percent, at 9,972.18. The Standard & Poor's 500 Index <.SPX> slid 13.31 points, or 1.22 percent, at 1,079.60. The Nasdaq Composite Index <.IXIC> fell 10.82 points, or 0.50 percent, at 2,154.47.
For the week, the Dow was off 0.2 percent, the S&P 500 shed 0.7 percent and the Nasdaq slipped 0.1 percent.
Stocks fell despite a surge in sales of previously owned U.S. homes to a two-year high in September. Analysts said the rise was partially driven by a soon-to-expire tax incentive for first-time buyers. [ID:nN2395552]
Weekly U.S. government data showing a decrease in stores of gasoline helped push crude prices lower, even as overall fuel inventories are still much higher than a year ago. [EIA/S]
"Oil is holding around $80 but the decline in equities markets and a stronger dollar mean the rally in oil prices has been stalled for now," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
U.S. crude
The dollar rose against a basket of major currencies, with the U.S. Dollar Index <.DXY> up 0.48 percent at 75.476.
The euro was down 0.18 percent at $1.4995, and against the
yen, the dollar
U.S. Treasury debt prices eased as investors positioned to cut prices ahead of next week's record sales of government notes. [ID:nN23432472]
The benchmark 10-year U.S. Treasury note
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed down 0.6 percent at 1,008.88. The index is up 21 percent this year and has gained almost 56 percent from a record low hit in March after sliding 45 percent in 2008.
"If you go through the corporate earnings results, the top line is still suggesting it's a difficult environment for improving sales," said analyst Jane Foley of FOREX.com.
Gold dropped in choppy trade. U.S. December gold futures
But copper climbed to a 13-month high on favorable economic
data. Copper for December delivery
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> was up 1.3 percent.
The Nikkei index <.N225> in Tokyo finished up 0.2 percent. (Reporting by Rodrigo Campos, Wanfeng Zhou and Joshua Schneyer in New York, and Joanne Frearson, Barbara Lewis and Emelia Sithole-Matarise in London; Writing by Herbert Lash; Editing by James Dalgleish)