* Wall St tumbles; S&P closes below its 50-day moving average for first time since April
* Dollar adds to monthly gain on strong U.S. labor market data
* Traders eye U.S. nonfarm payrolls data for July
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 U.S. dollar edged higher against a basket of major currencies for its strongest monthly gain in over a year.
Wall Street was hit hard, with the Dow and the S&P 500 posting their first monthly decline since January, while the Nasdaq fell for a third month in the last five.
The benchmark S&P 500 index closed below its 50-day moving average for the first time since April 15 and posted its biggest one-day percentage decline since April 10. 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."
The Dow Jones industrial average fell 317.06 points, or 1.88 percent, to end at 16,563.3. The S&P 500 lost 39.4 points, or 2 percent, to 1,930.67 and the Nasdaq Composite dropped 93.13 points, or 2.09 percent, to 4,369.77.
MSCI's All-World Index was down 1.5 percent and European shares fell 1.2 percent.
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.
Most U.S. Treasuries were steady, overcoming earlier price losses, as investors sought 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. Debt prices 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 earlier rising as high as 2.61 percent, the highest since July 8.
The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last up 0.03 percent at 81.460. The index posted its biggest monthly gain in nearly 1-1/2 years, rising more than 2 percent in July. (Reporting by Angela Moon; Editing by Dan Grebler)