GLOBAL MARKETS-Recession fear hits stocks, emerging mkts routed

* Stocks markets battered by recession, earnings fears

* Europe down 2.1 percent, Japan 2.5

* Emerging markets stocks and bonds under heavy pressure

* Dollar rises to two-year high before dropping back

By Jeremy Gaunt, European Investment Correspondent

LONDON, Oct 23 (Reuters) - Fear of global recession battered stock markets again on Thursday while a flight from emerging market debt and stocks helped push the dollar to a two-year high against major currencies.

European shares lost more than 2 percent and Asian shares hit four-year lows.

Investors were also focusing on major company earnings reports, fearful that the worst financial crisis in 80 years and a deteriorating global economy would combine to decimate corporate profits.

Emerging markets were particularly under the gun.

MSCI's main emerging market stock index <.MSCIEF> was down 3.8 percent on the day, hitting a nearly four-year low after major losses on Wednesday. It has lost nearly 35 percent of its value so far this month.

Emerging market sovereign debt spreads <11EMJ> blew out to more than 825 basis points over U.S. Treasury yields, a gap not seen since late 2002.

The cost of insurance against sovereign debt default in countries such as South Korea, Indonesia, the Philippines, Russia and Kazakhstan has soared over the past two days.

"There is now little argument that the world economy will experience a period of sub-par growth, and a recession in several advanced economies looks increasingly likely," Goldman Sachs said in a research note.

Investor flight from emerging markets over the past few weeks has accelerated this week, helping push the U.S. dollar to new heights as money is both repatriated from overseas and seeks relative safety in U.S. fixed income. The dollar index <.DXY>, which tracks the greenback against a basket of major currencies, hit a two-year high of 86.07, although it later fell back to 85.56.

The euro was barely changed from late U.S. trade at $1.2844 .

"We are going to see the current pressures continue as tensions in emerging markets continue. The dollar will remain supported and the high yielders will stay under pressure," said Ian Stannard, FX analyst at BNP Paribas.

EARNINGS IN SIGHT

European shares were choppy, rising by more than 1 percent at one point before tumbling. The FTSEurofirst 300 <.FTEU3> index of leading European shares was down 2.1 percent after falling 5.4 percent on Wednesday.

Results were mixed. Nestle , the world's biggest food group, reported a forecast-beating rise in nine-month sales. Agrochemicals and seeds group Syngenta also reported a strong rise in third-quarter sales.

But Swiss bank Credit Suisse Group AG fell after it confirmed a 1.3 billion Swiss franc third-quarter loss, engineering group ABB plunged after posting a forecast-missing rise in third-quarter net profit, helped by demand from emerging markets.

In the United States, Microsoft will release quarterly results alongside drugmakers Eli Lilly and Bristol-Myers Squibb as well as Dow Chemical and mail and logistics group United Parcel Service .

Earlier, Japan's Nikkei average <.N225> hit its lowest point since May 2003 before paring losses to end down 2.5 percent. It shed 213.71 points to 8,460.98 after earlier falling as low as 8,016.61, its lowest in nearly five and a half years.

The broader Topix <.TOPX> ended the day down 2 percent at 871.70 after earlier falling more than 6 percent.

Euro zone government bond yields fell. The two-year Schatz yield was 9 basis points lower at 2.734 percent and 10-year Bund yields were down 1 basis point at 3.796 percent . (Additional reporting by Jessica Mortimer, editing by Mike Peacock)