(Adds byline, dateline, previous LONDON)
* MSCI world stocks index sees biggest fall in 7 weeks
* Asia stocks retreat after 10 days of gains
* Bonds rally as Fed mulls yield curve control, guidance
* Oil tumbles towards first weekly fall since April
* World FX rates in 2020 tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, June 11 (Reuters) - The safe-haven Japanese yen and Swiss franc gained on Thursday while a gauge of global equity markets fell the most in seven weeks after the Federal Reserve's sobering outlook cast doubt on hopes for a V-shaped recovery from the coronavirus pandemic.
Stocks on Wall Street fell, a 10-day winning streak in Asia came to a halt and the main European bourses tumbled about 3%, snuffing a rally that had recouped much of the market's deep losses and even drove the Nasdaq to record highs this week.
U.S. Treasury and euro zone government bonds rallied after the Fed signaled it plans years of extraordinary support to counter the economic fallout from a still spreading pandemic.
The number of Americans seeking jobless benefits fell last week, but millions laid off because of COVID-19 continue to receive unemployment checks, suggesting the U.S. labor market could take years to heal even as hiring resumes.
The Fed is not painting a perfect V-shaped recovery and is going to be ultra-accommodative for a very long time, said Esty Dwek, head of global market strategy at Natixis Investment Managers in Geneva.
"Suddenly the question is, 'Well, why are they're going to be so accommodative if the recovery is going so well?'" she said.
Some of the selloff "is probably just by not being the V-shaped the market is priced for right now, and some of it is taking a breather after the last few weeks," Dwek said.
In a reality check to the stock market's recent euphoria, the Fed predicted the U.S. economy would shrink 6.5% in 2020 and unemployment would still be at 9.3% at year's end.
MSCI's all-country world index, which tracks shares in 49 nations, fell 3.26% to 522.18, it's biggest slide since April 21. Europe's broad FTSEurofirst 300 index dropped 4.11% to 1,378.16.
On Wall Street, the Dow Jones Industrial Average fell 1,180.35 points, or 4.37%, to 25,809.64. The S&P 500 lost 117.09 points, or 3.67%, to 3,073.05 and the Nasdaq Composite dropped 275.90 points, or 2.75%, to 9,744.45.
Fed Chair Jerome Powell confirmed the Fed was studying yield curve control, a form of easing already employed by Japan and Australia.
John Vail, chief global strategist at Nikko Asset Management in Tokyo, said in his view the Fed is moving toward yield curve control, which should keep 10-year yields at 1% or less and will tend to suppress the dollar, at least for a while.
Yields on 10-year Treasury notes dropped sharply from last week's peak of 0.96%. The 10-year Treasury note fell 6.9 basis points to yield 0.6739%, while German 10-year bund yields fell 8.9 basis points to -0.416%.
The yen rose to a one-month high against the dollar, while the Swiss franc climbed to a three-month peak. The euro also rose, leaving open the possibility of more downside for the dollar.
The euro fell 0.04% at $1.1365, and the yen slid 0.38% at $106.6800.
Market sentiment also took a hit as new coronavirus infections in the United States showed a slight increase after five weeks of declines, only part of which was attributed to more testing.
Eric Toner, a senior scholar at the Johns Hopkins Center for Health Security, said, "There is a new wave coming in parts of the country. It's small and it's distant so far, but it's coming."
Oil prices tumbled around 7%, fueled by renewed concerns about demand destruction as new cases of coronavirus tick up globally, while the United States saw another large build in crude inventories.
Brent crude futures fell $2.81, or 6.73%, at $38.92 a barrel. U.S. crude slid $3.14, or 7.93%, at $36.46 a barrel.
Reporting by Herbert Lash; Editing by Steve Orlofsky