Updated at 4:17 p.m. ET (2017 GMT

By Chris Prentice and Naomi Rovnick

NEW YORK/LONDON Aug 2 (Reuters) -Surprisingly weak U.S. employment data on Friday stoked fears of a recession ahead, prompting investors to dump stocks and turn to safe-haven bonds.

Treasury prices surged, sending yields to multi-month lows.

Oil price benchmarks fell by more than $3 per barrel at their session lows. The U.S. dollar index =USD dropped over 1% toits weakest sinceMarch.

Richly valued technology firms bore much of the pain, and an index of European bank stocks headed for its largest weekly decline in 17 months on soft earnings.

The VIX stock market volatility measure .VIX, dubbed Wall Street's fear gauge, surged over 40%.

Friday's U.S. jobs report showed job growth slowed more than expected in July and unemployment increased to 4.3%, pointing to possible weakness in the labor market and greater vulnerability to recession.

Markets were already rattled by downbeat earnings updates from Amazon and Intel and Thursday's softer-than-expected U.S. U.S. factory activity survey in addition to the monthly U.S. non-farm payrolls report, which showed job growth slumped to 114,000 new hires in July from 179,000 in June.

The data raised expectations of multiple rate cuts by the Federal Reserve this year, which just this week opted to keep rates unchanged.

"The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the fed funds rate this week," said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia.

"It’s very possible the Fed alters its inter-meeting communications on the balance of risks to remove all doubt about aSeptember rate cut. "

With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei .N225, its biggest daily fall since March 2020 during the COVID-19 crisis, rippled through Europe and headed for Wall Street.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 16.09 points, or 2.00%, to 787.31.

The Nasdaq Composite .IXIC lost 417.98 points, or 2.43%, to 16,776.16. The index has fallen more than 10% from its July closing high, confirming it is in a correction after concerns grew about expensive valuations in a weakening economy.

The Dow Jones Industrial Average .DJI fell 610.71 points, or 1.51%, to 39,737.26, the S&P 500 .SPX lost 100.12 points.

Europe's STOXX 600 .STOXX fell close to 3%, with financials and technology the worst hit.

Emerging market stocks .MSCIEF fell 24.30 points, or 2.23%, to 1,063.50.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 2.48% lower 2.48%, at 553.72, while Japan's Nikkei .N225 fell 2,216.63 points, or 5.81%, to 35,909.70.

The Fed has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession.

Money markets on Friday rushed to price a 70% chance of the Fed, which was already widely expected to cut rates from September, implementing a jumbo 50 basis points cut next month to insure against a downturn.

The "employment report flashes a warning signal that this economy does have the ability to turn rather quickly," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis.

"Ultimately, today’s employment data should embolden the committee to cut policy by more than 25 basis points at the next meeting."

RUSH AWAY FROM TECH, TO SAFE HAVENS

Shares in U.S. chipmaker Intel INTC.O tumbledto a more than 11-year low and finished down over 26%, after suspendingits dividend and announcing heftyjob cuts alongside underwhelming earnings forecasts.

Artificial intelligence chipmaker Nvidia .NVDA, one of the biggest contributors to the tech rally, dropped 1.8%

Up more than 700% since January 2023, Nvidia hasleft many asset managers with an outsized exposure to the fortunes of this single stock.

Safe-haven buying went full throttle, with government debt, gold and currencies traditionally all rallying. They are assets viewed as likely to hold value during market chaos.

The yield on benchmark U.S. 10-year notes US10YT=RR fell 18 basis points to 3.798%.

The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, fell 28.5 basis points to 3.8798%.

In foreign exchange markets, the yen added nearly 2%, JPY=EBS extending a rapid bounceback after the Bank of Japan raised interest rates to levels unseen in 15 years.

In commodities, spot gold XAU= lost 0.37% to $2,436.31 an ounceand U.S. gold futures GCc1 settled 0.4% lower to $2,4769.8.

Oil prices took a hit on the growth worries, with global benchmark Brent futures LCOc1 settled down $2.71, or 3.41%, to $76.81 a barrel. U.S. West Texas Intermediate crude futures CLc1 finished down $2.79, or 3.66%, at $73.52.

Additional reporting by Rae Wee in Singapore; Editing by Alex Richardson, Marguerita Choy, Deepa Babington and Chizu Nomiyama

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