* Stock indexes extend decline to third straight day
* Index of top European shares hits lowest since Sept '13
* U.S. 10-yr Treasury yields touch 1-yr lows
* Market declines, oversupply drag oil prices lower (Updates to open of U.S. trading, changes byline, dateline; pvs LONDON)
By Sam Forgione
NEW YORK, Feb 9 (Reuters) - Stock indexes worldwide tumbled for the third straight session on Tuesday on fears of slowing global growth, with particular concern around the health of the banking sector, while benchmark U.S. Treasury yields hit fresh one-year lows.
The European banking index .SX7P fell 4.6 percent after sinking 5.6 percent on Monday on fears of worsening bank profitability and capital strength from sustained low interest rates.
Deutsche Bank shares DBKGn.DE fell 4.1 percent after slumping 9.5 percent on Monday on concerns about its ability to maintain bond payments. Shares of U.S. banks also stumbled, with the S&P financial index last down over 1 percent.
U.S. shares recovered ground on improvement in technology stocks, but all three major U.S. indexes were flat to lower, with losses being felt in energy and financial stocks. Stocks lost more than 1 percent Monday.
"The general thematic (risk) continues to be the European banking situation that has unhinged the risk market and slowly crept into the credit markets," said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.
The FTSEurofirst 300 index slumped but was off its lowest level since Sept. 2013, which was touched earlier in the session. in Asia set the tone for the session, with yields on longer-term Japanese bonds falling below zero for the first time and Japan's Nikkei .N225 plummeting 5.4 percent. Chinese markets are closed through the week for the Lunar New Year.
MSCI's all-country world equity index .MIWD00000PUS was last down 2.25 points, or 0.62 percent, at 358.56.
The Dow Jones industrial average .DJI was last down 32.19 points, or 0.2 percent, at 15,994.86. The S&P 500 .SPX was down 1.29 points, or 0.07 percent, at 1,852.15. The Nasdaq Composite .IXIC was up 1.77 points, or 0.04 percent, at 4,285.53. FTSEurofirst 300 index .FTEU3 ended down 1.4 percent at 1,222.11.
Yields on benchmark 10-year Treasury notes US10YT=RR , known for their relative safety, extended Monday's declines to hit 1.682 percent, their lowest in a year. The notes were last up 3/32 in price to yield 1.7226, from a yield of 1.735 percent late Monday. another safe-haven asset, rose in price and was just below the 7 1/2-month high struck the previous day. prices fell, dragged lower by the broad decline across major financial markets and by a growing expectation that global demand will not grow quickly enough to erase the overhang of unwanted crude any time soon. crude LCOc1 was last down 89 cents at $32 a barrel. U.S. crude CLc1 was last down 24 cents at $29.46 per barrel.
The U.S. dollar extended its drop against the safe-haven Japanese yen, hitting its lowest against the yen since Nov. 2014 for the second straight session. The concerns also caused the Mexican peso MXN= to hit an all-time low against the dollar.
"Markets were very risk-averse out of the gate this week, and it's continued today," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.
Spot gold prices XAU= were last up $2.2 at $1,192.96 an ounce.