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NEW YORK (Reuters) - Investors swapped equities for less risky assets such as U.S. Treasuries and the yen on Friday on fears about the impact of Britain's June 23 referendum on whether it should leave the European Union.
An index of world equity markets suffered its worst day in four months after having snapped a five-day winning streak on Thursday, while oil prices slid and were off 2016 highs hit this week due to a stronger dollar.
U.S. Treasury yields, which move inversely to prices, fell to four-month lows as European sovereign debt yields plunged on continuing concerns about global growth and a potential British exit from the EU.
Though bookmakers' odds point towards a vote to stay in the EU, polls suggest a neck-and-neck race.
Ten-year yields in Germany, Japan and Britain all struck record lows.
"It really is the risk-off trade today," said Eric Wiegand, senior portfolio manager at U.S. Bank's Private Client Reserve in New York.
Investors ditched stocks in favor of assets considered safer during times of economic uncertainty, such as bonds, gold, and the yen.
Wall Street followed the lead of Asian and European stocks to fall for a second straight day, with the energy sector hit the hardest.
"There is an accumulation of factors, not the least of which is Brexit. That's certainly translating into some weakness, particularly in energy," Wiegand said.
The Dow Jones industrial average .DJI fell 119.85 points, or 0.67 percent, to close at 17,865.34, the S&P 500 .SPX shed 19.41 points, or 0.92 percent, to end at 2,096.07 and the Nasdaq Composite .IXIC dropped 64.07 points, or 1.29 percent, to finish at 4,894.55.
The MSCI world equity index .MIWD00000PUS of shares in 45 nations was down 1.41 percent.
Europe's broad FTSEurofirst 300 index .FTEU3 fell to its lowest in four weeks. The index closed down 2.34 percent at 1,308.83, as political worries put pressure on cyclical stocks.
In the currency market, the yen JPY= and Swiss franc CHF= rose as oil prices slid and bank shares led global equity markets lower, stoking a fresh wave of bids for low-risk assets.
The U.S. dollar index .DXY, which measures the dollar against a basket of currencies, added to earlier gains to touch a one-week high after a University of Michigan survey showed U.S. consumer sentiment eroded less than forecast in early June. The index was up 0.69 percent at 94.602.
Gold rebounded to a fresh three-week high as investor risk aversion lifted appetite for the metal. Spot gold XAU= was up 0.47 percent to $1,274.41 an ounce.
Benchmark 10-year U.S. Treasury notes US10YT=RR were up 11/32 in price to yield 1.6438 percent.
Oil prices lost more ground after data from Baker Hughes showed U.S. energy firms added rigs drilling for oil for a second week in a row for the first time since August.
"This looks like the beginning of a trend that will translate to the slowing down of U.S. crude production declines," said Tariq Zahir, who trades WTI futures spreads for Tyche Capital Advisors in New York.
Brent crude LCOc1 settled down $1.41, or 2.71 percent, at $50.54 a barrel, while U.S. crude CLc1 settled down $1.49, or 2.95 percent, at $49.07.
Additional reporting by Barani Krishnan and Karen Brettell in New York and Yashaswini Swamynathan in Bengaluru; Editing by Chizu Nomiyama and James Dalgleish