* Wall St tumbles with Dow, S&P turning negative for July
* European shares hit by Argentina default, U.S. rate hike worries
* U.S. Treasuries prices stable on month-end demand
By Angela Moon
NEW YORK, July 31 (Reuters) - Global equity markets tumbled on Thursday, hurt by ongoing tensions with Russia and Argentina's second default in 12 years, while the dollar edged higher against a basket of major currencies.
Wall Street was hit hard, with major stock indices down more than 1 percent and the Dow Jones industrial average on track to record its first monthly decline since January.
The benchmark S&P 500 index suffered its biggest one-day decline since April 10 and moved solidly under its 50-day moving average, a level it has not closed below since April 15. The moving average is viewed as a sign of short-term momentum, and selling accelerated after the level was breached.
"It's getting pretty ugly," said Peter Kenny, chief market strategist at Clearpool Group in New York.
"This is really a blending of several geopolitical themes that are driving that risk-off trade. Whether it is Ukraine/Russia crisis, whether it is Israel/Gaza, whether it is Argentine default - you pick the theme, but if you put them all together - it is providing the type of headwind that is making people more inclined to take money off the table than put it to work."
Russia banned soy imports from Ukraine and may restrict Greek fruit and U.S. poultry, Russian news agencies reported on Thursday, in what could be responses to new Western sanctions.
Separately, Argentina defaulted for the second time in 12 years. Investors had hoped for a midnight deal with holdout creditors, but the plan fell through. Even a short default will raise companies' borrowing costs, add to pressure on the peso, drain dwindling foreign reserves and fuel one of the world's highest inflation rates.
U.S. Treasuries were steady, erasing earlier price losses, as investors sought out lower-risk debt for month-end rebalancing.
U.S. government debt has weakened since gross domestic product data on Wednesday showed a strong rebound in the second quarter from a weak start to the year.
That extended into Thursday morning as data showed U.S. labor costs recorded their largest increase in more than 5-1/2 years in the second quarter, a sign that a long-awaited acceleration in wage growth was imminent. The debt stabilized, however, as some investors shifted out of stocks and into bonds to adjust month-end balance sheets.
Benchmark 10-year notes were little changed to yield 2.56 percent, after yields earlier rose as high as 2.61 percent, the highest since July 8.
On Wall Street, the Dow Jones industrial average was down 216.74 points, or 1.28 percent, at 16,663.62. The Standard & Poor's 500 Index was down 26.95 points, or 1.37 percent, at 1,943.12. The Nasdaq Composite Index was down 70.90 points, or 1.59 percent, at 4,392.00.
MSCI's All-World Index was down 1.1 percent and European shares fell 1.2 percent.
The U.S. dollar index, which measures the dollar against a basket of six major currencies, was flat at 81.435, below a 10-1/2 month high of 81.573 touched earlier in the session.
The euro was last down 0.07 percent against the dollar at $1.3387, just above an eight-month trough. The dollar was up 0.07 percent against the Japanese yen at 102.85 yen but was down 0.02 percent against the Swiss franc at 0.9085 franc. (Reporting by Angela Moon; Editing by Dan Grebler)