* Wall Street down over 1 pct, retreating from Wednesday peak
* European stocks, global shares also down over 1 pct
* Brent crude oil dives 3 pct to below $105
By Barani Krishnan
NEW YORK, May 30 (Reuters) - Stocks and commodities tumbled on Wednesday on signs the euro zone crisis had spread to larger economies like Spain, pushing the benchmark U.S. Treasury yield to a 60-year low as investors sought safe havens.
In Italy and Spain, bond yields headed in the opposite direction as investors demanded higher returns to buy debt issued by troubled euro zone economies.
Wall Street’s S&P 500 index was on track for its sharpest loss in two weeks, marking an about-turn from the previous session’s two-week highs.
European stocks and global shares also fell by more than 1 percent.
The euro neared a two-year low as Spain’s central bank governor said the government would miss its deficit target this year.
Worries grew that Madrid may have to join Athens in exiting the euro.
“It seems inevitable the euro has got to break up, it’s just how long can they drag it out and what are the ramifications,” said Nathan Snyder, portfolio manager at Snow Capital Management in Sewickley, Pennsylvania.
“So much of this is unwritten it is hard to put any sort of odds on how this plays out,” he added.
An hour after the open, the Dow Jones industrial average was down 131.27 points, or 1.04 percent, at 12,449.42. The Standard & Poor’s 500 Index was down 15.52 points, or 1.16 percent, at 1,316.90. The Nasdaq Composite Index was down 34.81 points, or 1.21 percent, at 2,836.18.
The benchmark 10-year U.S. Treasury note was up 28/32, with the yield at 1.6526 percent.
It marked the note’s lowest yield in at least 60 years as bids for U.S. government debt and other low-risk investments intensified due to worries of ripple effects from problems in the Spanish banking system.
German government yields also declined as the yield on 10-year Spanish sovereign debt rose to near 7 percent, or six-month highs, on concerns over how Spanish banks will obtain capital to stay afloat.
Italian 10-year yields topped 6 percent for the first time since January.
The euro was last down 0.8 percent to $1.2400 after touching 1.2387, its lowest since early July 2010. It also lost nearly 1.5 percent against the safe-haven yen, taking it to a four-month low of 98.274 yen.
The pressure on the single currency and other European asset markets gained a brief respite when the European Commission, the executive arm of the European Union, said the euro area should move towards direct recapitalisation of banks using its permanent bailout fund.
It also called for the region to move towards a full banking union and consider issuing euro bonds - all measures that could ease the crises in peripheral European nations but would face strong opposition from some member states, including Germany.
The euro’s weakness underpinned the dollar index, measured against a basket of major currencies, which rose above 82.923 — its highest since September 2010, dragging down dollar-sensitive commodities.
London’s benchmark Brent crude dived 3 percent to hover at around $103, snapping the key $105 support. U.S. crude in New York fell 2 percent to below $90 support.
Gold, a commodity that occassionally gets thrown into the safe-haven mix during risk flights, wasn’t spared either. The spot price of the precious metal fell 1 percent to below $1,540 an ounce.