* S&P 500 down 10.5 pct for year
* MSCI world stock index down more than 20 pct from record
high
* 10-yr Treasury yields hit 1.53 pct, lowest since Aug 2012
* U.S., European banking shares tumble
* U.S. oil lowest in over 12 years; gold jumps to highest in
a year
* Dollar hits lowest vs yen since October 2014
By Sam Forgione
NEW YORK, Feb 11 (Reuters) - Stock markets fell worldwide on
Thursday on fears over the health of the global economy and the
banking sector, with MSCI's global stock index dropping to more
than 20 percent below its all-time high, while safe-haven
10-year Treasury yields hit their lowest since 2012.
Doubts about central banks' ability to avoid deflation and
stimulate economic growth have now pushed the U.S. benchmark S&P
500 .SPX index down 10.5 percent for the year. The
FTSEurofirst 300 .FTEU3 index of top European shares sank to
its lowest level in 2-1/2 years.
Yields on benchmark 10-year U.S. Treasury notes hit 1.53
percent, their lowest level since August 2012, on the worries
over global growth and the effectiveness of central bank policy.
The U.S. dollar hit its lowest against the yen since October
2014, at 110.985 yen, and was on track for its worst week
against the Japanese currency since 2008.
"There are mounting concerns about the ability of central
banks to continue to prop up asset prices," said Omer Esiner,
chief market analyst at Commonwealth Foreign Exchange in
Washington. "That's part of why we're seeing assets across the
board come under pressure."
European bank stocks ended 6.3 percent .SX7P lower, making
them the worst-performing sector and widening their losses for
the year to more than 28 percent. Shares of Societe Generale
SOGN.PA , France's second-biggest bank, closed down 12.6
percent after disappointing profit results.
The S&P financial stock index .SPSY ended down about 3.0
also on concern that low economic growth and negative interest
rates in some countries is undermining bank profitability.
MSCI's all-country world equity index .MIWD00000PUS , which
tracks shares in 45 nations, was last down 4.73 points, or 1.32
percent, at 353.35. The index hit its lowest level in more than
2-1/2 years and closed down more than 20 percent from an
all-time high.
YELLEN SAYS FED POLICY NOT PRE-SET
The slump in stocks and bond yields declines came even as
Federal Reserve Chair Janet Yellen sought to reassure investors
in congressional testimony that the Fed will remain flexible in
its approach. The markets, however, do not expect the Fed to
raise rates further this year, compared with Fed forecasts that
still point to more tightening.
"Credit has been signaling these concerns, and to some
extent other markets, and particularly equity, have caught up
with what credit had been telling them, which was: We're really
worried about global growth, we're really worried that central
banks are running out of ammunition," said David Riley, head of
credit strategy at BlueBay Asset Management in London.
The Dow Jones industrial average .DJI ended down 254.56
points, or 1.6 percent, at 15,660.18. The S&P 500 .SPX lost
22.78 points, or 1.23 percent, at 1,829.08. The Nasdaq Composite
.IXIC dropped down 16.76 points, or 0.39 percent, to 4,266.84.
Europe's broad FTSEurofirst 300 index .FTEU3 closed down
3.68 percent at 1,195.76.
The 10-year U.S. Treasury note yield dropped to 1.53
percent, its lowest since September 2012, while the 30-year bond
yield hit 2.38 percent, its lowest in a year.
The yield spread between 10-year and 2-year notes narrowed
to its tightest since November 2007, reflecting an outlook for
weak economic growth and low inflation.
U.S. crude prices fell, hitting a 12-year low of $26.05 a
barrel as domestic stocks grew and Goldman Sachs (N:GS) called for
depressed prices until the second half of the year.
Brent crude LCOc1 settled down 78 cents, or 2.53 percent, at
$30.06 a barrel.
Safe-haven spot gold XAU= surged 5.3 percent to $1,260.60,
the highest in a year. U.S. gold futures for April delivery
GCJ6 settled up 4.5 percent at $1,247.80 per ounce.