* Global stocks slide on economic data, ailing banks fear
* Gold futures shoot above $1,000 in flight to safety
* Government bond prices rise as risk aversion grows
* Oil slumps as deteriorating economy dents demand (Adds close of European markets)
By Herbert Lash
NEW YORK, Feb 20 (Reuters) - Jitters about ailing banks and worsening economies slammed global markets on Friday as investors fled risky assets such as stocks for the relative safety of government debt and gold, which shot above $1,000 an ounce.
The Dow Jones industrials and European shares slid to six-year lows, while the S&P 500, a broad measure of U.S. equities, edged closer to breaking through November lows that would take it to new bear market lows and a levels last seen 12 years ago.
A rout in bank shares and a surprise slide in euro zone services and manufacturing activity in February, suggesting the first quarter’s economic contraction may be as bad as or worse than the end of 2008, sent European indexes lower.
The euro surged to session highs against the dollar on the fear of bank nationalizations after automatic buy orders were triggered. Safe-haven buying lifted U.S. gold futures to a seven-month high above a key psychological level of $1,000.
U.S. Treasury and euro-zone government debt prices also rallied, driven by deepening anxiety about the fragile banks.
“The market has bigger fish to fry as it contemplates more long weekends as big decisions on the banking sector are confronted,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.
In early afternoon trading, the Dow Jones industrial average .DJI tumbled 188.45 points, or 2.52 percent, to 7,277.50. The Standard & Poor's 500 Index .SPX tumbled 21.69 points, or 2.78 percent, to 757.25. The Nasdaq Composite Index .IXIC fell 21.50 points, or 1.49 percent, to 1,421.32.
Of the 3,138 shares that traded on the New York Stock Exchange, 548 set new 52-week lows. Only 2 stocks rose to a 52-week high.
Bank of America shares slid more than 27 percent, while Citigroup fell nearly 30 percent to $1.76 a share.
European shares also plunged, with the FTSEurofirst 300 .FTEU3 index of top European shares falling 3.7 percent to end at 735.74 points -- its lowest closing level since March 2003.
Safe-haven buying lifted U.S. gold futures to a seven-month high, putting the benchmark gold contract within reach of the record high at $1,033.90 hit in April.
“It’s a direct barometer of risk aversion reaching elevated levels,” said Michael Woolfolk, senior currency strategist at Bank of New York-Mellon in New York.
Spot gold prices XAU= rose 2.6 percent to $998.90, but some expressed caution about the surge in gold prices.
“People are buying gold for emotional reasons and on worries about bank nationalization in a reactionary move. There are certainly smart people who are buying it and there were a lot of smart people buying oil at $140 too,” said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
Oil prices retreated after jumping 14 percent on Thursday on an unexpected drawdown in U.S. crude supplies. Worries about demand for energy resurfaced, with sentiment heavily dented by the sharp slide in the world’s equity markets.
U.S. light sweet crude oil CLc1 fell 3.7 percent to $38.02 a barrel.
The dollar fell against a basket of major currencies, with the U.S. Dollar Index .DXY down 1.09 percent at 86.492.
The greenback has benefited from extreme risk aversion in recent months as investors sought relative safety in dollar-denominated assets such as U.S. Treasuries.
The benchmark 10-year U.S. Treasury note US10YT=RR was up 1-2/32 in price to yield 2.732 percent. The 2-year U.S. Treasury note US2YT=RR was up 4/32 in price to yield 0.9076 percent. (Reporting by Charles Mikolajczak, Chris Reese, Wanfeng Zhou and Nick Olivari in New York, Lucia Mutikani in Washington, George Matlock in London and Peter Starck in Frankfurt; writing by Herbert Lash; editing by Gary Crosse)