* Wall St falls on dismal U.S. jobs data for June
* Yields on benchmark Treasuries approach 3 percent
* World stocks slip from five-week highs
* US crude down more than 2 pct, erasing Thursday gains (Updates prices)
By Barani Krishnan
NEW YORK, July 8 (Reuters) - Stock markets around the world fell on Friday and oil slumped as a dismal report on America's labor market disappointed investors expecting a stronger recovery in the world's largest economy.
Gold capped its best week of the year and investors rushed into U.S. Treasury debt, turning safe-haven investments into the day's top performers.
The U.S. Labor Department said the country's non-farm payrolls -- a key indicator for global markets -- grew by only 18,000 in June, the weakest reading since September, and well below economists' expectations of a gain of 90,000. For details, see [ID:nN1E7670C0]
"It's a terrible number. There is no good news you can glean from it," said David Semmens, U.S. economist at Standard Chartered in New York.
Anxiety about another recession spurred a stampede into short-term interest-rate futures. Investors now expect the Federal Reserve will keep interest rates near zero into late 2012 to support the fragile economy.
The spot price of gold shot up almost 1 percent for the day. Longer-dated Treasuries surged a full point or more, while the yield on the benchmark 10-year note hovered at around 3 percent.
In commodity markets, U.S. crude oil futures prices
Wall Street's benchmark S&P 500 index fell nearly 1 percent, wiping out most of the gains in the last two sessions.
At 3:09 p.m. EDT (1909 GMT), the Dow Jones industrial average <.DJI> was down 87.98 points, or 0.69 percent, at 12,631.51. The Standard & Poor's 500 Index <.SPX> was down 12.26 points, or 0.91 percent, at 1,340.96. The Nasdaq Composite Index <.IXIC> was down 22.30 points, or 0.78 percent, at 2,850.36.
Global equities retreated from five-week highs to head lower. European stocks slid as the negative sentiment emanating from the U.S. jobs report added to worries about the peripheral euro-zone banking sector.
The MSCI world equity index <.MIWD00000PUS> shed 0.7 percent to 344.91. The FTSEurofirst 300 index <.FTEU3> slid 0.8 percent to close at 1,114.44. An index of emerging market stocks <.MSCIEF> hit a two-month high before slipping 0.4 percent to 1,163.50.
The dollar fell as low as 80.48 yen
The price of the 30-year U.S. Treasury bond
The benchmark 10-year U.S. Treasury note
In Europe, German Bunds rallied and peripheral nations' bonds came under pressure as concerns over slow progress on a second Greek bailout and the health of European banks underpinned demand for safe-haven assets.
Oil prices slid in volatile trade after the U.S. payrolls data dashed hopes of investors who had positioned themselves for a much stronger number.
U.S. crude oil