* MSCI world stocks fall to fresh 2011 low
* Dow falls 360 points, S&P 500 down 3.4 pct
* Yen slides after Tokyo intervenes
* ECB in the market buying bonds - traders (Updates to afternoon)
By Edward Krudy
NEW YORK, Aug 4 (Reuters) - Widespread capitulation hit global equity markets on Thursday as growing anxiety over the global economic outlook spurred a flight to safe-haven bonds and sent stocks crashing to fresh lows for the year.
European stocks tumbled to a level not seen since after the financial crisis in mid-2009, with Italy's equity market firmly in bear market territory -- down nearly 30 percent since February -- as investors worried the euro-zone debt crisis was spreading.
Italy's blue-chip FTSE MIB index <.FTMIB>was suspended about 30 minutes before the close. The index tumbled slightly more than 5 percent.
Major U.S. indexes fell more than 3 percent, erasing gains for the year as the broad-based S&P 500 entered a corrective phase, down more than 10 percent from its peak in May.
Intense selling this week reflects a frustration with politicians to address pressing concerns over high public debt levels in Europe and the United States as large industrial economies show signs of running aground.
"People are throwing in the towel because they can't find relief on any front," said Milton Ezrati, market strategist at Lord AbbettCo in Jersey City, New Jersey, which manages $110 billion in assets.
With investors seemingly caught in a perfect storm, officials around the world moved to calm markets. The boldest step came from Tokyo, where the government spent an estimated 1 trillion yen ($13 billion) to stem the strength of its currency.
The yen-selling pushed the dollar roughly 4 percent higher
to 80.25 yen on trading platform EBS, well off a low of 76.29
set on Monday. The dollar traded on Thursday afternoon at 78.83
yen
The Japanese intervention came a day after an unexpected cut in interest rates by Switzerland to weaken the franc, which has spiked in recent days as investors seek safe havens. The currency edged slightly higher in New York trade on Thursday.
Even gold, which has raced to a series of highs near $1,700 an ounce amid the gathering uncertainty, fell as deepening losses on Wall Street prompted investors to sell the metal and cover losses to meet margin calls outside of the commodity sector.
The exodus from stocks pushed the broad Standard & Poor's
500 Index <.SPX> down as much as 3.7 percent, while the clamor
for safe-haven investments drove the yield on the 10-year U.S.
Treasury note
Less than an hour before the close, the Dow Jones industrial average <.DJI> dropped 379.71 points, or 3.19 percent, at 11,516.73. The Standard & Poor's 500 Index <.SPX> was down 43.84 points, or 3.48 percent, at 1,216.50. The Nasdaq Composite Index <.IXIC> was down 97.98 points, or 3.64 percent, at 2,595.09.
The MSCI world equity index <.MIWD00000PUS> was down 3.7 percent for the day, its largest daily fall in a year, and hit a fresh 2011 low.
European stocks <.FTEU3> lost 3.3 percent.
Safe-haven assets like the Swiss franc, the yen and gold have spiked this week as investors fret that governments around the world are planning spending cuts at a time of slowing global economic growth.
The latest spate of economic data points to slowing demand in the United States, while the euro zone grapples with the spread of its debt crisis to Spain and Italy, where borrowing costs have increased sharply.
The European Central Bank kept interest rates unchanged on Thursday, but traders said the central bank has been buying bonds of peripheral euro-zone countries in an effort to keep rates lower.
German Bunds gained, while Italian and Spanish government bond yields rose in volatile trade after a euro- zone monetary source said the European Central Bank was planning to buy only Portuguese and Irish bonds. For more see [ID:nR1E7IF024].
Markets were unconvinced the ECB bond buying will be effective in stopping contagion and some were disappointed that Italian and Spanish bonds, whose yields climbed above 6 percent recently, were not the target of the purchases.
"It wasn't a unanimous decision to (buy bonds). (ECB President Jean-Claude) Trichet looked really uncomfortable saying it," one trader said.
"The market, obviously, dismissed it pretty rapidly," another trader said.
Brent