GLOBAL MARKETS-Europe falls again as global rout resumes

* European shares, periphery euro bonds slump for second

day.

* U.S. data awaited as U.S. Treasuries nudge 2 percent

* Dollar steadies, commodities take another step lower

* Euro skids 11 month low vs yen, gold climbs

By Marc Jones

LONDON, Oct 16 (Reuters) - World markets (Xetra: 4WM.DE - news) tumbled for a

second day on Thursday, hurt by concerns about the health of

world economy and fears that Europe's debt crisis was waking up

from a two-year siesta.

European stock markets slumped, with London

, Frankfurt and Paris down 1.8, 1.7 and

2.4 percent by midday and Greek shares down 3 percent for

a loss of 17 percent in a week.

Wall Street was also expected to open sharply lower,

with futures prices signalling falls of 1.3 percent for the S&P

500 and 1.4 for the Dow Jones, as market

volatility stayed at its highest since 2011 and investors braced

for a flurry of economic data and earnings.

Assets that depend on economic growth, such as shares and

oil, have been hit by a raft of weak indicators from Europe at a

time when other big economies including China, Japan and Brazil

face their own hardships.

These come as the U.S. Federal Reserve prepares to wind down

later this month the asset purchase programme that has boosted

markets over the past two years. Many observers doubt that new

measures from the European Central Bank will make up for it.

"Equity markets are going through a growth, inflation and

liquidity scare right now and we are seeing some pretty savage

equity price moves," said Morgan Stanley (Xetra: 885836 - news) strategist Graham

Secker.

"Positioning and technical factors are driving near-term

asset prices, so investors are effectively having to sell what

they can."

The euro skidded to a fresh 11-month low against the

safe-haven yen while euro zone peripheral bonds from Greece to

Portugal and Italy to Spain saw renewed heavy selling.

The sell-off had echoes of the zenith of the euro debt

crisis and left investors scurrying for traditional safe havens.

German 10-year Bund yields -- which fall as

demand for the bonds rises -- hit a fresh record low. U.S.

Treasury yields were nudging 2 percent again and

gold also sprang back up towards a one-month high.

EURO ZONE ON ALERT

As well as meek global growth, European markets have been

rattled by fears that the fragile government in Greece, one of

the countries at the centre of the region's debt crisis, could

fall and leave an anti-bailout party to take the reins in

Athens.

Greek 10-year bond yields jumped 110 bps again to 8.94

on Thursday as their biggest sell-off since

October 2008 continued.

One of Greece's euro partners told Reuters late on Wednesday

that Athens was changing its mind about quitting its EU/IMF aid

programme next year, while a source said on Thursday the ECB

would make it easier for Greek banks to tap its cheap funding.

But the sell-off was not confined to Greece. Portuguese

, Spanish and Italian

10-year yields rose too, jumping 25-45 bps to 3.75, 2.45 and

2.31 percent respectively.

They all pulled further away from Germany's benchmark Bunds

, which sank to new low yield of 0.75 percent.

German Chancellor Angela Merkel told parliament in Berlin on

Thursday that the euro zone must not drop its guard.

"The crisis has not yet been permanently and sustainably

overcome because the causes, regarding the set-up of the

European economic and currency union and the situation of

individual member states, haven't been eliminated," she said.

GROWTH GLOOM

In the currency markets, the U.S. dollar was back on

a firmer footing after one of its sharpest drops of the year on

Wednesday as the Japanese yen, which tends to be favoured

during market turbulence also made gains.

Only a month ago, markets were thinking the Federal

Reserve could raise U.S. rates as early as June next year, but

after the stormy last few weeks traders have pushed back their

expectations to the first quarter of 2016.

Wall Street stocks have been slammed too. The benchmark S&P

500 and the MSCI (NYSE: MSCI - news) 45-country world index

have lost almost 10 percent in the last three weeks. U.S. stocks

are still up 170 percent since the depths of the financial

crisis in 2009 though.

As U.S. trading began, the dollar's index was at 85.188,

flat on the day.

Oil and commodity prices were back under pressure, though.

Brent crude, which has fallen more than 28 percent

since June amid slow demand and signs that producers are not

cutting output, hovered at a 4-year low of $82.93 a barrel as

U.S. crude slumped to $80.45.

Safe-haven gold, meanwhile, was within touching

distance of a one-month high at $1,242, while growth-sensitive

copper fell 1.25 percent after shedding 2.3 percent in

the previous session, its biggest daily drop since March.

(Additional reporting by Harpreet Bhal in London; editing by

Anna Willard)