By Isla Binnie

NEW YORK (Reuters) -World stock indexes fell on Friday as a global cyber outage rattled investors, while the dollar climbed and was on track to snap a two-week streak of declines.

The outage hit services from airlines to banks, unsettling markets further after a turbulent week.

Cybersecurity firm CrowdStrike fell 8.2% after an update to one of its products appeared to trigger the outage that affected customers using Microsoft’s Windows Operating System, disrupting businesses across sectors.

Euronext exchange and London Stock Exchange Group’s Workspace news and data platform also faced issues. LSEG later said its data and services were back online.

“Today’s outages remind us that services can have supply chain disruptions too,” said Jeff Kleintop, chief global investment strategist at Charles Schwab. “While not a cyberattack, the outage is a worrisome reminder of how our systems are deeply integrated.”

The Cboe Volatility index – Wall Street’s “fear gauge” – was at its highest level since early May.

MSCI’s gauge of stocks across the globe fell 4.69 points, or 0.57%, to 812.76. The STOXX 600 index fell 0.76%.

The Dow Jones Industrial Average fell 337.37 points, or 0.84%, to 40,327.65, the S&P 500 lost 17.55 points, or 0.30%, to 5,527.04 and the Nasdaq Composite lost 56.06 points, or 0.32%, to 17,813.99.

U.S. megacaps were mixed. Nvidia lost around 1%, while Apple and Alphabet stayed broadly positive.

U.S.-listed shares of Taiwan Semiconductor Manufacturing extended earlier losses to shed around 3.5% on the day.

Microsoft was down 0.3% after the cloud disruption.

DOLLAR RECOVERS

In currency markets, the dollar made some headway after hitting a four-month low in the middle of the week.

The dollar index, which measures the greenback against a basket of currencies, gained 0.17% to 104.32, with the euro down 0.1% at $1.0885.

It is set for a 0.2% gain for the week after two weeks of losses, supported by this week’s firm economic data and Friday’s jitters about the outage, even as conviction grows that the Fed could cut interest rates in September.

The euro slipped 0.1% to $1.0885, having dipped the previous session after the European Central Bank kept rates on hold as expected, but left the door open to a September cut. The ECB downgraded its view of the euro zone’s economic prospects.

Two ECB policymakers on Friday backed further interest-rate cuts, expressing greater confidence that inflation was heading to the central bank’s goal next year.

U.S. Treasury yields rose, with little to drive market reaction as investors waited on fresh data next week.

The yield on benchmark U.S. 10-year notes rose 4.5 basis points to 4.233%, from 4.188% late on Thursday.

In commodities, U.S. crude lost 1.03% to $81.97 a barrel and Brent fell to $84.27 per barrel, down 0.99% on the day.

In cryptocurrencies, bitcoin gained 3.01% to $65,740.00, while spot gold lost 1.63% to $2,405.11 an ounce.

(Reporting by Isla Binnie in New YorkAdditional reporting by Rae Wee in Singapore and Marc Jones, Amanda Cooper and Dhara Ranasinghe in LondonEditing by Andrew Cawthorne, Arun Koyyur and Matthew Lewis)

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