* Global stocks slump on concerns about economic recovery
* Oil falls below $67 barrel as Europe debt worries fester
* Bonds rally on flight to safety on U.S. data
* Euro retains selling bias, falls 0.6 percent vs dollar (Updates with close of European markets)
By Herbert Lash
NEW YORK, May 20 (Reuters) - Global stocks and the euro slid on Thursday, with U.S. stocks down 10 percent from this year's highs, as worries mounted that Europe's debt crisis could crimp world economic growth.
Crude oil fell below $67 a barrel to its lowest in nearly eight months on concerns about weak demand, while government debt prices soared as falling equity markets and an unexpected jump in new U.S. jobless claims drove a flight to safety. For details see [ID:nLDE64J1GY] [ID:nN20338649]
Fears that other euro zone countries will follow Germany's move on Tuesday to ban short selling in some stocks and bonds propelled a widespread aversion to risk.
Germany said restoring confidence in the euro was its "top priority," while a Federal Reserve official said Europe's debt crisis poses a "potentially serious" risk to the U.S. recovery as it threatens global credit markets and commerce. [ID:nSGE64J05H] [ID:nN20148593]
"Investor uncertainty is leading to a flight to quality and safe havens," said Peter Dixon, economist at Commerzbank.
"Dumping stocks seems sensible with so much uncertainty on the macro environment, and all fundamental ways of looking at value are out of the window."
Markets were volatile. Traders pointed to purchases of 10-year Treasury notes by an Asian buyer and to a huge seller of e-minis, a futures contract providing holders exposure to the benchmark Standard & Poor's 500 Index <.SPX>.
The Chicago Board Options Exchange Volatility index <.VIX>, often referred to as Wall Street's fear gauge, rose as much as 28 percent to its highest intraday level since April 2009. [ID:nN20254844]
The Reuters-Jefferies CRB index <.CRB>, a global benchmark for commodities, slumped to 8-1/2 month lows.
The euro
MSCI's all-country world equity index <.MIWD00000PUS> fell 2.4 percent, while its emerging markets index <.MSCIEF> was off almost 3.0 percent.
At 12:30 p.m., the Dow Jones industrial average <.DJI> was down 279.85 points, or 2.68 percent, at 10,164.52. The Standard & Poor's 500 Index <.SPX> was down 32.96 points, or 2.96 percent, at 1,082.09. The Nasdaq Composite Index <.IXIC> was down 75.54 points, or 3.29 percent, at 2,222.83.
The S&P 500 slipped into negative territory for the year on Wednesday and fell more than 10 percent from its April high, signifying a correction.
European shares slipped for a second session, as financial stocks were hit hard.
The FTSEurofirst 300 <.FTEU3> index of top European shares finished down 2.2 percent at 974.80 points.
An apparent lack of unity among euro-zone leaders on tackling debt problems triggered U.S. worries about additional regulation.
"You hear the cliche the markets hate uncertainty, and there is a whole hill of it over there right now," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.
Interbank dollar and euro funding costs rose, with a key dollar lending rate rising to a 10-month high, as demand for the U.S. currency remained solid in a jittery market. [ID:nLDE64J1HP]
German 10-year government bond yields hit a record low and euro zone government bond futures extended gains to a fresh session high after the U.S. labor market data suggested the still feeble recovery has hit a stumbling block.
The number of U.S. workers filing new applications for unemployment insurance unexpectedly rose last week for the first time since early April, the Labor Department said. [ID:nN20125298]
The benchmark 10-year U.S. Treasury note
The U.S. dollar rose against a basket of major currencies, with the Dollar Index <.DXY> up 0.09 percent at 86.47.
Against the yen, the dollar
Oil extended early losses on the U.S. jobless data and slide in global equity markets.
U.S. light sweet crude oil
Spot gold prices
Worries over the euro zone hammered Asian stocks, driving MSCI's index of Asia-Pacific shares outside of Japan <.MIAPJ0000PUS> down 2.4 percent to an eight-month low.
Japan's Nikkei average <.N225> closed at a new three-month low despite data that showed Japan's economy grew 1.2 percent in the first quarter, outpacing its euro zone and U.S. peers. [ID:nTOE64J003] (Reporting by Nick Olivari and Ellen Freilich in New York and Emma Farge, Ian Chua and William James in London; Writing by Herbert Lash; Editing by Kenneth Barry)