GLOBAL MARKETS-Dollar, stocks fall as U.S. spending deadline looms
* Chance of U.S. government shutdown hangs over markets
* Dollar slides broadly, most major world stock indexes lower
* Oil rebounds, paring earlier losses
NEW YORK, Sept 27 (Reuters) - Global equity markets fell and the dollar hit a 7 1/2-month low against the Swiss franc on Friday as a potential U.S. government shutdown next week and a possible debt default several weeks later unsettled investors.
Republicans in the U.S. House of Representatives on Thursday refused to give in to President Barack Obama's demand for straightforward bills to run the government beyond Sept. 30 and to increase borrowing authority to avoid a historic default.
Congress must negotiate a budget deal by Oct. 1 or risk a government shutdown.
"As this deadline approaches, investors are stepping up their sale of dollars on the growing concern that a government shutdown will undermine the quality of U.S. assets and lead to a retrenchment in U.S. growth," said Kathy Lien, managing director at BK Asset Management in New York.
Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey, said as the weekend approaches, tensions were mounting over the haggling in Washington.
"Until there's greater visibility, the market is going to be choppy and erratic," Bakhos said.
The dollar fell against both the yen and the euro, as well as the safe-haven Swiss franc. The dollar index was down 0.49 percent to 80.128 against a basket of other major currencies.
MSCI's all-country world equity index fell 0.22 percent, and the FTSE Eurofirst 300 index of leading European shares fell 0.51 percent to 1,251.09.
The Dow Jones industrial average was down 99.57 points, or 0.65 percent, at 15,228.73. The Standard & Poor's 500 Index was down 9.36 points, or 0.55 percent, at 1,689.31. The Nasdaq Composite Index was down 11.21 points, or 0.30 percent, at 3,776.22.
Economic data was mixed.
U.S. consumer sentiment slid in September to its lowest in five months as consumers saw higher interest rates and sluggish economic growth ahead, a survey showed.
The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment slipped to 77.5 in September from 82.1 in August - the lowest final reading since April.
U.S. household spending rose in August as incomes were buoyed by solid wage gains, suggesting growing momentum in the U.S. economy despite months of reduced government spending.
American families spent 0.3 percent more last month than the month before, which was in line with the median forecast in a Reuters poll, Commerce Department data showed.
U.S. Treasuries prices rose on concerns about the implications of a U.S. government shutdown.
Benchmark 10-year Treasury notes were up 7/32, their yields easing to 2.6227 percent.
Brent crude oil rose, paring earlier losses.
Brent crude oil for November hovered near break-even, trading 2 cents higher to $109.23.
U.S. crude for delivery in November rose 64 cents to $103.67 a barrel,