(Adds opening of U.S. markets; changes dateline; previous LONDON)
By Chuck Mikolajczak
NEW YORK May 15 Investors flooded into safe-haven benchmark U.S. and German government bonds and fled equities worldwide on Thursday following mixed U.S. and weak European economic figures.
U.S. stocks were nearly 1 percent lower, led by small-cap issues. The Russell 2000 small-cap index was in correction territory, having dropped more than 10 percent from its record close earlier this year.
"Bonds are effectively acting as the parking place for capital until we see more consistency and a more compelling reason to put money to work in the (stock) market," said Peter Kenny, CEO of Clearpool Group in New York.
Bond prices in Spain, Italy and other peripheral European nations fell sharply, erasing early gains.
Those markets were rattled by comments from Slovak Prime Minister Robert Fico, who said Russia's Vladimir Putin told multiple European states that Moscow will not supply gas to Europe as of June 1 if Ukraine does not pay its bills. However, Moscow and Kiev have taken some tentative steps to resolve this dispute.
Yields on benchmark 10-year U.S. Treasury notes fell as low as 2.47 percent, lowest since October 30. The U.S. bond market earlier rallied in tandem with Europe's, bolstered by weak euro zone growth that further cemented expectations the European Central Bank will lower rates in June.
That turned to a safe-haven rally after the Putin news and weak U.S. industrial production data and a fall in U.S. homebuilder sentiment.
U.S. stocks were weighed down by Wal-Mart Stores Inc , which fell 2.6 percent after it forecast second-quarter profit below analysts' estimates.
The Dow Jones industrial average dropped 157.72 points, or 0.95 percent, at 16,456.25. The Standard & Poor's 500 Index was down 19.80 points, or 1.05 percent, at 1,868.73. The Nasdaq Composite Index was down 46.78 points, or 1.14 percent, at 4,053.85.
Data showed the euro zone expanded by just 0.2 percent on a quarter-over-quarter basis in the first three months of 2014. European stocks declined 0.8 percent, erasing early gains to a six-year peak.
The MSCI world equity index also fell 0.8 percent.
ECB President Mario Draghi signaled last week that the bank was poised to ease monetary policy next month to support the euro zone economy. Federal Reserve Chair Janet Yellen has also suggested continued support for the U.S. economy.
The euro trimmed early declines and was down 0.1 percent to $1.3698 after hitting a low of $1.3647, while Germany's 10-year Bund yield hit its lowest in a year at 1.30 percent. (Reporting by Chuck Mikolajczak; Editing by Dan Grebler)