GLOBAL MARKETS-Stocks, dollar fall on economy concerns

* MSCI world equity index down 0.7 pct

* German reinsurer warnings, weak US data spook investors

* Dollar slips, oil recovers from seven-week low

By Natsuko Waki

LONDON, July 25 (Reuters) - World stocks hit a one-week low on Friday while the dollar fell as dismal U.S. housing and jobs data and warnings from German reinsurers fanned concerns about the health of the financial sector and the broader economy.

Insurers came under pressure after Germany's Munich Re (MUVGn.DE) issued a profit warning, while Hannover Re (HNRGn.DE) said it would be difficult to reach full-year targets if capital markets don't calm down.

The news, along with Thursday's data highlighting weakness in the U.S. housing and labour markets, spooked investors who had bet earlier this week that the one-year-old credit crunch was not damaging corporates and the economy so much.

"With the real economy still in deep trouble and house prices falling, financial losses will continue to mount. We are not out of the woods, even though there are some occasional rays of sunshine," said Paul Mortimer-Lee, global head of market economics at BNP Paribas.

The FTSEurofirst 300 index .FTEU3 fell 1.1 percent while the MSCI main world equity index .MIWD00000PUS lost 0.7 percent after a rally from July's 21-month low fizzled out earlier in the week.

U.S. stock futures SPc1 were pointing to a weaker open on Wall Street later.

ECONOMIC FALLOUT

There are increasing signs the global economy is slowing.

Key measures of business activity and company sentiment fell more than expected in the euro zone while Japanese exports shrank in June for the first time in nearly five years at a time when the country's inflation is climbing to a decade high.

"The risks to growth are skewed to the downside," State Street Global Advisors said in a note to clients.

"Financial institutions remain reluctant to offer easy credit while their own balance sheets are under repair. Most businesses that can borrow are faced with interest costs that are the most onerous in five years, and a growing sense of caution reinforces their reluctance to invest aggressively."

The dollar was down half a percent against a basket of major currencies .DXY. The U.S. currency lost 0.4 percent to $1.5737 per euro EUR=.

Emerging sovereign spreads 11EMJ widened 2 basis points while emerging stocks .MSCIEF were down 1.7 percent.

The September Bund future FGBLU8 rose 50 ticks, drawing in safe-haven demand in the face of falling stocks.

U.S. light crude CLc1 rose 0.5 percent to $126.18 a barrel after falling more than $20 from its record high.

Gold XAU= rose to $931.50 an ounce.