NEW YORK (Reuters) - Oil slid more than four percent yesterday and the yen soared broadly in its biggest jump in months as new signs and related news of tepid economic activity spurred risk aversion and the appeal of government debt.

Strong demand for the US Treasury's latest sale of 10-year notes offered fresh evidence of the desire by both foreign and domestic investors for US debt in an uncertain economic climate that is hanging like a pall over markets.

Concerns about a recovery also could be seen with investors questioning whether China will be a driver of global growth considering the eruption of Chinese ethnic unrest.

US equities pared most of their losses late in the session as investors hoped that corporate results would top estimates as the quarterly earnings season kicked off. Aluminum producer Alcoa Inc., the first Dow component to report second quarter earnings, said after the market close that it had posted its third consecutive quarterly loss.

Sentiment was still broadly negative, with declining issues outpacing advancing issues by almost two-to-one on the New York Stock Exchange.

Global stocks declined. MSCI's all-country world index fell almost one percent.

The Dow Jones industrial average closed up 14.81 points, or 0.18 percent, at 8,178.41. The Standard & Poor's 500 Index fell 1.47 points, or 0.17 percent, at 879.56. The Nasdaq Composite Index was up one point, or 0.06 percent, at 1,747.17.

Gains in the yen accelerated after it broke through key technical levels, traders said, leading investors to reverse trades where they had borrowed in yen to buy higher-yielding currencies.

"It's a risk-driven market and risk is in the process of being unwound," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.

The euro fell more than three percent to a low of 127.05 yen , its lowest since May, according to Reuters data. Against the dollar, the euro was down 0.35 percent at $1.3871.

It was the biggest one-day move in the euro against the yen since November and the biggest one-day move by the dollar against the yen since March.

The dollar fell against a basket of major currencies, with the US Dollar Index off 0.03 percent at 80.681. Against the yen, the dollar was down 2.31 percent at 92.67.

The drop in crude prices triggered a sell-off in other commodities, with tin and nickel falling more than five percent each in London.

US crude settled at $60.14 a barrel, its sixth straight day of declines and the lowest close since May 19.

London Brent crude settled down at $60.43.

"Distillate stocks are showing signs that the economy has not had any real improvements yet," said Mike Zarembski, senior commodities analyst at optionsXpress in Chicago.

US government bond prices shot up and pushed benchmark yields to six-and-a-half week lows after the Treasury sold $19 billion of 10-year debt without the slightest hitch.

Despite oft-stated concerns about the amount of debt the US Treasury must sell to finance efforts to end a deep recession and fund various financial rescues, risk-averse investors beat a path to the government's latest auction.

Demand was firmer than people had expected, said David Dietze, chief investment strategist at Point View Financial Services in New York.

"Basically the fear trade is raising its head," Mr. Dietze said.

Unease over the economic outlook was driven in part by an International Monetary Fund report that said the global economy is likely to contract 1.4 percent this year, more than the 1.3 percent decline it projected in April.

US government debt shot higher. The benchmark 10-year US Treasury note was up 43/32 in price to yield 3.29 percent. The two-year US Treasury note rose three/32 in price to yield 0.91 percent.

US government weekly data that showed gasoline stocks had risen by 1.9 million barrels, more than expectations for a 600,000 barrel increase, also bolstered the view that the US economy was far from rebounding.

Distillate stocks, including diesel, climbed 3.7 million barrels, compared with an expected two million barrel rise, to their highest level in nearly 25 years.

"Oil data from the United States were very bearish today and that reinforced the negative sentiment for industrial commodities," said Justin Lennon, a copper analyst at Mitsui Bussan Commodities in New York.