(Recasts lead, adds quotes from Gross, closing market prices, Moody's and S&P reaction)

By Jennifer Ablan

NEW YORK, May 21 (Reuters) - Bill Gross, manager of the world's biggest bond fund, warned on Thursday the United States will eventually lose its top AAA credit rating, a fear that had already spooked financial markets on Thursday and could keep the dollar, stocks and bonds under heavy selling pressure.

The United States will face a downgrade in "at least three to four years, if that, but the market will recognize the problems before the rating services -- just like it did today," Gross told Reuters.

Gross, the co-chief investment officer of Pacific Investment Management Co. and manager of the Pimco Total Return Fund, which has $154 billion in assets, earlier had told Reuters via email that market declines on Thursday were due to investor fears that the United States is "going the way of the UK -- losing AAA rating which affects all financial assets and the dollar."

Standard & Poor's on Thursday lowered its outlook on Britain to "negative" from "stable," threatening the nation's top AAA rating. Britain faces a one in three chance of a ratings cut as debt approaches 100 percent of gross domestic product.

European shares fell as S&P's potential UK credit cut added to worries sparked by news on Wednesday that Federal Reserve policy-makers had cut their U.S. growth forecasts over the next three years. The pan-European FTSEurofirst 300 index of top shares fell 2.1 percent to 857.52 points, breaking five successive sessions of gains.

U.S. equities also slumped, and Treasuries and the dollar -- which typically rise on a bid for assets perceived as lower risk when stocks fall -- also declined as worries about swelling U.S. deficits soured investors on U.S. assets.

The Dow Jones industrial average .DJI closed down 129.91 points, or 1.54 percent, at 8,292.13, while the Standard & Poor's 500 Index .SPX was down 15.14 points, or 1.68 percent, at 888.33.