* World equity markets extend falls into seventh day
* Debt crisis sends euro zone back into recession
* Middle East tensions support oil, Brent hits $111 a barrel
* Yen sinks to 6-1/2 mth low vs dollar, euro firms to $1.2760
By Richard Hubbard
LONDON, Nov 15 World equity markets fell for a seventh day on Thursday, hit by evidence that Europe's debt crisis has stalled economic growth and by persistent concern over the budget problems in the United States.
Stock index futures pointed to a slight recovery on Wall Street later, though data on the jobs market, consumer price inflation and business activity in New York and Philadelphia could have a big impact on sentiment.
Brent crude oil jumped to $111 a barrel as fighting in the Gaza Strip sparked worries of an escalation that could ultimately disrupt oil supplies from the Middle East.
"The global economy faces some severe headwinds. Against that backdrop we see short-term de-risking of portfolios," said Abi Oladimeji, head of investment strategy at Thomas Miller Investment.
The FTSEurofirst 300 index of top European shares was down 0.7 percent at 1,080.62 points, having fallen 1 percent on Wednesday, but actual trading volume was quite low. London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 were down around 0.5 to 0.9 percent.
Growth in Germany, Europe's largest economy, cooled to 0.2 percent over the July-September period compared with the previous three months, while data showed the wider 17-nation euro zone has slipped back into recession.
Economic output in the euro area fell 0.1 percent in the third quarter after falling 0.2 percent in the April to June period, making it the second recession since 2009.
"The double-dip is a fact," said Martin Van Vliet, an economist at ING Bank. "What you notice is that the recession in southern Europe is slowly creeping to other countries."
The MSCI world equity index was down 0.2 percent at 317.92 points and has now lost over 3 percent this month. MSCI's broadest index of Asia Pacific shares outside Japan fell 1 percent.
World stocks are now on course for a seventh successive day of losses, hit by the prospect of a slowdown in the giant U.S. economy if politicians can't strike a deal to avoid the 'fiscal cliff' - a series of spending cuts and tax rises due to take effect early next year.
U.S. stocks fell more than 1 percent on Wednesday after President Barack Obama reiterated his call for the wealthy to pay higher taxes, setting the stage for a budget battle with Republicans in Congress.
The unveiling of an older, conservative new leadership line-up in China on Thursday also appeared to dent hopes that the government would take bold steps to deal with slowing growth in the world's second-biggest economy.
However, Johannes Reich, head of equity research and strategy at Bankhaus Metzler, said the current accommodative monetary policies from the world's major central banks should prevent a sharp retracement in share markets.
"It is going to be bumpy ride for equities but I do not see a major trend up or down," Reich said.
The retreat from riskier assets also weighed on commodities, but not oil, which moved higher as Israeli warplanes bombed targets in and around Gaza city and Palestinian militants from Hamas fired a rocket that killed three Israelis.
Benchmark Brent crude rose $1.39 cents to $111 a barrel, having risen more than 1 percent on Wednesday. U.S. oil was up 16 cents to $86.49/bbl.
Bucking the gloom, Tokyo's Nikkei rose 1.9 percent as the boost given to exporters such as Toyota Motor Corp, Honda Motor Co and Canon Inc. from a weakening yen outweighed global growth concerns.
The yen has fallen sharply against the dollar and the euro since Japanese Prime Minister Yoshihiko Noda indicated he would call a snap election for next month that the opposition Liberal Democratic Party, which has called for aggressive monetary easing to support growth, is expected to win.
The yen hit a 6-1/2-month low against the dollar at 81.20 yen and fell to 103.60 against the euro.
The single currency, which generally moves in line with riskier assets, inched up 0.1 percent to $1.2760, recovering from Tuesday's two-month low of $1.2661.
Some analysts said investors were wary of selling the euro heavily in case policymakers surprised markets with decisive action to tackle the euro zone debt crisis.
"They don't want to sell into it too aggressively in case there's a policy response from the European Central Bank that would see people get stopped out of shorts," said Geoffrey Yu, currency strategist at UBS.
However, the single currency is seen as vulnerable to concerns about slowing growth and uncertainty over aid for Greece and Spain.