GLOBAL MARKETS-Stocks fall before U.S. presidential debate, oil rises

* Oil prices climb on hopes of OPEC production freeze

* European stocks retreat as Deutsche Bank (LSE: 0H7D.L - news) hits record low

* Yen rises despite BOJ Kuroda's pledge of more stimulus

* Safehaven U.S., German yields fall, spot gold gains (Updates market action, changes dateline, previous LONDON)

By Richard Leong

NEW YORK, Sept 26 (Reuters) - Stock prices around the world declined on Monday ahead of the first U.S. presidential debate between Hillary Clinton and Donald Trump, while oil prices rose in advance of an informal OPEC meeting in Algeria on hopes for an output cut.

Half of America's likely voters will rely on the presidential debates to help them make their choice between the two major U.S. party nominees in the Nov. 8 election, according to a Reuters/Ipsos (LSE: 0KA3.L - news) poll released on Monday.

"The polls have both candidates neck-to-neck. The debates might increase the lead of one over the other and that's what the market is fearful of," said Peter Cardillo, chief market economist at First Standard Financial in New York.

In early trading, the Dow Jones industrial average was down 137.96 points, or 0.76 percent, at 18,123.49, the S&P 500 was down 13.56 points, or 0.63 percent, at 2,151.13 and the Nasdaq Composite shed 39.86 points, or 0.75 percent, to 5,265.89.

"We feel that with central bank meetings behind us, the focus will now be more on political risks and so investors have been spending more time trying to understand the potential implications for a Trump victory," said Mark Dowding, co-head of investment grade debt at BlueBay Asset Management.

He said that while a Trump victory could be viewed internationally as bad for global assets, U.S. domestic investors were more sanguine.

European stocks fell, dragged down by a pullback in the shares of major banking and energy companies. Deutsche Bank shares hit a record low on worries about Germany's biggest lender in the wake of a massive $14 billion demand from the U.S. Department of Justice to settle claims on bad mortgage-backed securities.

Europe's broad FTSEurofirst 300 index dropped 1.6 percent to 1,337.57. It was on track for its steepest single-day fall since July 6.

Japan's Nikkei stock index ended 1.3 percent lower.

The MSCI world equity index, which tracks shares in 45 nations, fell 3.5 points, or 0.83 percent, to 416.52.

Oil prices rebounded after Algeria's energy minister said on Sunday that all options were possible for an output cut or freeze at this week's informal meeting of OPEC producers.

Brent crude was last up 89 cents, or 1.94 percent, at $46.78 a barrel. U.S. crude was last up 87 cents, or 1.96 percent, at $45.35 per barrel.

YEN STRENGTHENS

Bank of Japan Governor Hiruhiko Kuroda said earlier Monday the central bank would use all tools necessary to get inflation back to its 2-percent target, but his remarks did little to shift a conviction among bank analysts that the Bank of Japan is increasingly unable to weaken the yen.

The dollar shed over 0.5 percent to 100.33 yen, moving back toward a one-month low of 100.10 touched last week, while the euro weakened 0.2 percent at 113.07 yen.

The greenback has fallen following the U.S. Federal Reserve's downgrade of its economic outlook last week. It also hinted it is in no rush to raise U.S. interest rates although it left the door open for a possible hike in December.

Bets on a gradual pace of U.S. rate increases, together with jitters about the outcome of the U.S. presidential election in about seven weeks, underpinned demand for U.S. and German government debt, sending their 10-year yields to their lowest in over two weeks.

U.S. 10-year Treasury note yield slipped 2 basis points at 1.598 percent, while the German 10-year yields fell 2 basis points to minus 0.10 percent.

Spot gold prices rose $3.51 or 0.26 percent, to $1,340.72 an ounce. (Additional reporting by Yashaswini Swamynathan in Bengaluru, Abhinav Ramnrayan, Patrick Graham in London, Lisa Twaronite, Leika Kihara in Tokyo; Editing by Bernadette Baum)