GLOBAL MARKETS-Stocks, dollar ease on growth, inflation concerns

(Adds close of U.S. markets)

* U.S. again questions China on Phase I trade deal

* Friday’s jobs report looms over market

* Oil surges, adding pressure to inflation outlook

By Herbert Lash

NEW YORK, Oct 4 (Reuters) – The dollar eased and a gauge of global equity markets fell on Monday as investors worried about the potential for renewed U.S.-China trade tensions, stalled talks in Congress and rising inflation as oil prices surged to multi-year highs.

U.S. Treasury yields rose on investor caution about the need to raise the government’s debt ceiling as the United States faces the risk of a historic default in two weeks.

Oil jumped after Reuters reported the Organization of Petroleum Exporting Countries and allies would stick to their current output policy instead of boosting supply more.

Brent crude futures settled up $1.98 at $81.26 a barrel, while U.S. crude rose $1.74 to settle at $77.62 a barrel.

New orders for U.S.-made goods accelerated in August, pointing to sustained strength in manufacturing even as economic growth appeared to slow in the third quarter due to shortages of raw materials and labor.

Manufacturing is still being hobbled by global supply-chain issues, while data last week showed high inflation sharply cut consumer spending in July, with a moderate rebound in August.

“The negatives are building and have been building for the last several weeks during this bit of a downturn that we’ve seen,” said Tim Ghriskey, chief investment strategist at Inverness Counsel.

Top U.S. trade negotiator Katherine Tai pledged to unwind some tariffs imposed by former President Donald Trump on goods from China while pressing Beijing to keep its promises.

Tai said Washington seeks to stop China from pouring billions of dollars of state subsidies into its semiconductor, steel and other industries.

“In the past, escalation of U.S.-China trade tensions has sparked risk off among investors,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

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MSCI’s all-country world index fell 1.0% to 705.53, its lowest close since May 21, while the broad STOXX Europe 600 index closed down 0.47%.

In late trading on Wall Street, the U.S. Senate prepared to vote on a bill passed in the House of Representatives that would extend the U.S. debt limit to December 2022, eliminating one deadlock in Congress that has unsettled investors.

Earlier, President Joe Biden said a planned $3.5 trillion social spending bill that stalled last week in Congress will be smaller than progressive lawmakers would like.

The Dow Jones Industrial Average fell 0.94% to 34,002.92, the S&P 500 lost 1.30% to 4,300.46 and the Nasdaq Composite dropped 2.14% to 14,255.49 as investors dumped Big Tech stocks in the face of rising Treasury yields.

The dollar weakened from last week’s one-year highs as investors looked ahead to the release on Friday of September employment data, which could signal when the Federal Reserve begins to taper asset purchases.

Gold prices rose to a more than…