GLOBAL MARKETS-Stocks, oil tumble; yen, gov bonds rally

* MSCI world equity index down 1.5 pct at 202.42

* Deep recession fears weigh, oil hits 3-1/2 year low

* Yen rises to 5-week high vs dollar, gov bonds surge

By Natsuko Waki

LONDON, Dec 2 (Reuters) - World stocks fell on Tuesday, erasing more than half of last week's gains, while oil hit a 3-1/2 year low and the yen and government bonds surged as concerns intensified about a deep global recession.

Confirmation that the United States had entered recession in December 2007 and a warning from the Federal Reserve chief that the economy remained under considerable stress triggered a sell-off on Wall Street on Monday, with the S&P 500 index <.SPX<>

Australia delivered a bigger-than-expected interest rate cut of a full percentage point earlier and Britain, the euro zone and New Zealand are also seen lowering the cost of borrowing later this week.

However, investors are doubtful that action by central banks and also governments on fiscal stimulus -- taking place as many economies are already contracting -- would immediately bolster demand and corporate activity.

"Equities will have a rough ride in the start of December, and this will continue until we see a ray of hope on the macro side," said Franz Wenzel, strategist at AXA Investment Managers in Paris. MSCI world equity index .MIWD00000PUS fell 1.5 percent, edging closer to the 5-1/2 year low hit on November 21.

Emerging stocks .MSCIEF fell 3.2 percent.

U.S. crude oil CLc1 fell 2.8 percent to $47.88 a barrel, after hitting the low of $47.36 earlier.

The benchmark 10-year U.S. Treasury yield stood at 2.7155 percent, after falling to about 2.65 percent on Monday -- its lowest in 50 years.

Prices rose after Fed chairman Ben Bernanke signalled the central bank could buy government and agency bonds in order to influence yields and stimulate demand.

The National Bureau of Economic Research -- the arbiter of U.S. business cycles -- said the world's biggest economy fell into recession last December.

"If this recession lasts no longer than the longest previous downturn (16 months), the end to the slump would occur before May 2009," Nomura said in a note to clients.

"Of course, there's nothing sacrosanct about any of the metrics of previous slumps and the sharp deterioration of economic activity since September suggests this recession could surpass others in both depth and duration."

Interest rate futures FEDWATCH are pricing in a chance that the Fed to cut interest rates to at least 0.5 percent later this month.

In Europe, the December bund futures FGBLc1 rose 60 ticks.

The yen hit a five-week high of 92.64 per dollar as investors rushed to the low-yielding currency.

The dollar .DXY rose 0.2 percent against a basket of major currencies.

(Additional reporting by Sitaraman Shankar; Editing by Victoria Main)