GLOBAL MARKETS-Stocks, oil slip on US jobs report; bonds rally

* Wall St falls on dismal U.S. jobs data for June

* European stocks turn negative on euro zone banks

* World stocks slip from five-week highs

* U.S. crude down 2.4 percent, erasing Thursday's gains
(Recasts lead; updates prices and market activity)

By Barani Krishnan

NEW YORK, July 8 (Reuters) - U.S. stocks slipped on Friday,
snapping a two-day run-up, and oil slumped as a dismal report
on America's labor market in June disappointed investors
expecting a stronger recovery in the world's largest economy.

Global equities retreated from five-week highs to head
lower and European stocks fell too as the negative sentiment
emanating from the U.S. jobs report added to worries over the
peripheral euro zone banking sector.

Wall Street's benchmark S&P 500 index fell more than 1
percent, wiping out all its gains of the last two sessions.

In commodity markets, U.S. crude oil prices fell more than
2 percent, their most in two weeks, and in currencies, the
dollar fell against the yen and Swiss franc on bets that the
weak outlook for the U.S. economy will mean the Federal Reserve
will leave near-zero interest rates low well into 2012.

The dollar fell as low as 80.48 yen JPY= following the
jobs data from 81.48 yen earlier. It was last down 0.7 percent
at 80.64 yen. Against the Swiss franc CHF=, the greenback was
last trading down 0.8 percent at 0.8372 francs.

The bond market provided one of the few bright spots as
Treasuries rallied in response to bids by those seeking
alternative safe-havens to the yen and Swiss franc. [US/]

The Labor Department said U.S. nonfarm payrolls -- a key
indicator for global markets -- grew by only 18,000 in June,
the weakest reading since September and well below economists'
expectations of a 90,000 rise. For more see [ID:nN1E7670C0].

"It's a terrible number, there is no good news you can
glean from it," said David Semmens, U.S. economist at Standard
Chartered in New York.

"I don't think this puts pressure on the Fed to do more,"
he said, referring to interest rates.

At 12:30 p.m. (1630 GMT), the Dow Jones industrial average
.DJI was down 120.37 points, or 0.95 percent, at 12,599.12.
The Standard & Poor's 500 .SPX was down 16.17 points, or 1.19
percent, at 1,337.05. The Nasdaq Composite Index .IXIC was
down 32.74 points, or 1.14 percent, at 2,839.92.

Global stocks briefly extended Thursday's five-week highs
before falling along with equities in Europe and emerging
markets.

The MSCI world equity index .MIWD00000PUS was down 0.8
percent. The FTSEurofirst 300 index .FTEU3 closed down 0.8
percent. Emerging market stocks .MSCIEF hit two-month highs
before slipping 0.4 percent.

Prices on U.S. 30-year Treasury bonds US30YT=RR rose
after the June payrolls report fueled bets on tame inflation
and the Federal Reserve keeping interest rates low for longer
than previously thought. They were up 31/32 to yield 4.31
percent, down from 4.37 percent late on Thursday.

The benchmark 10-year U.S. Treasury note US10YT=RR was up
29/32, its yield at 3.03 percent against 3.14 percent
Thursday.

In Europe, German Bunds rallied and peripheral nations'
bonds came under pressure as concerns over slow progress on a
second Greek bailout and the health of European banks
underpinned demand for safe-haven assets.

Oil prices slid in volatile trade after the U.S. payrolls
data dashed hopes of investors who had positioned themselves
for a much stronger number.

U.S. crude oil CLc1 was down 2.4 percent at $96.30 a
barrel, having erased all of Thursday's gains. London's Brent
crude LCOc1 was down 1 percent before trimming losses to
around 0.3 percent, hovering around $118 a barrel. [O/R]

The euro EUR= was at $1.4253 to the dollar, as the gloomy
U.S. jobs data weighed on the greenback, pulling the euro up
from a session low of $1.4204. Traders said the sharp drop
toward the $1.42 level triggered short-term buying. [USD/]
(Additional reporting by Emelia Sithole in London; Editing by
James Dalgleish)