* MSCI world equity index down 0.7 percent at 220.78
* Swine flu fears hit risk assets
* Oil and euro tumble; govt bonds firm
By Natsuko Waki
LONDON, April 27 (Reuters) - World stocks tumbled after seven weeks of gains and oil and the euro fell on Monday as concerns intensified the spread of swine flu, which has killed more than 100 people in Mexico, would hit the global economy.
Travel and leisure-related stocks sank while the Mexican peso fell 3 percent against the dollar as the World Health Organization warned the flu, which has spread to the United States and possibly as far as New Zealand, has the potential to cause a worldwide pandemic.
"The swine flu seems to be one of those 'Black Swan' events that has caught the market by surprise. This is a concern as to whether it might impact any potential... recovery chances," said Martin Slaney, head of derivatives at GFT Global Markets. The MSCI world equity index fell 0.7 percent.
The decline comes after the index rose last week, posting seventh weeks of consecutive gains, as better-than-expected earnings results from some banks and other firms brightened sentiment.
U.S. stock futures fell 1.7 percent, pointing to a weaker open on Wall Street later. Firms reporting first-quarter results included Verizon Communications, the No.2 U.S. phone company.
The FTSEurofirst 300 index dropped 1.1 percent while emerging stocks lost 1.6 percent.
In Europe, travel and leisure sector stocks fell 3.5 percent while airlines such as British Airways, Air France-KLM and Deutsche Lufthansa dropped up to 13 percent.
Drugmakers advanced on hopes for vaccine against the virus. GlaxoSmithKline rose 3.5 percent. Its Relenza, or zanamivir, product along with Roche's Tamiflu, is the recommended drug for seasonal flu and has been shown to work against viral samples of the new disease.
U.S. crude oil fell 5.4 percent to $48.78 a barrel.
The euro fell 0.9 percent to $1.3132, hit by a rise in risk aversion, while the dollar rose 0.7 percent against a basket of major currencies. The yen rose 0.3 percent to 96.57 per dollar.
"If the disease proves to be more fatal, the dollar would rally and cross-yen would come under pressure," BNP Paribas said in a note to clients.
"Given the recent 'green shoots', the market would take any worsening of the outbreak as an obstruction to the global recovery process."
The Mexican peso fell as low as 13.69 per dollar, its lowest in almost three weeks.
The June Bund future rose 49 ticks, garnering safety-seeking flows.
Two-year euro zone government bond yields hit their lowest in almost one month at 1.303 percent after European Central Bank Governing Council member Nout Wellink was quoted as saying the central bank should discuss lowering interest rates below 1 percent. (Additional reporting by Dominic Lau; Editing by Toby Chopra)