(Fixes typo in quote in paragraph seven)

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European stocks drop after early rise

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Dollar regains strength on hawkish Fed speak

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Micron gloom frazzles chipmakers

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Oil and metals sag in commodity markets

LONDON, Nov 17 (Reuters) - Nagging recession and interest rate worries had Europe's markets spluttering on Thursday, and the pound tumbled as Britain sought to put its disastrous recent fiscal experiment behind it with an austere-looking budget.

Early optimism about Siemens' < SIEGn.DE> earnings and that the European Central Bank might slow its rate hikes quickly turned into more selling in Europe with Wall Street also expected to open 1% in the red.

That was also driven by renewed Fed policymaker talk that rates could shoot up further. It sent the dollar bounding 0.7% higher after a recent 7% slump and agitated government debt markets again.

Sterling had gone from $1.193 to $1.1798 against the greenback in London by the time the country's finance minister Jeremy Hunt had delivered his new budget plan of 55 billion pounds ($64.93 billion) of tax rises and spending cuts.

He and Prime Minister Rishi Sunak hope it will restore confidence after former PM Liz Truss' unfunded tax cut plans caused widespread panic, sent the pound to an all-time low and forced Truss to quit after just 50 days in charge.

DoubleLine portfolio manager Bill Campbell said the pound's rebound over the last month meant the budget's main headlines were probably already priced in, and that Britain's experience may well be mirrored elsewhere, especially with recessions looming and an ongoing energy crisis.

"The market has basically told the UK government that it is not going to accept anything too aggressive on the fiscal stimulus front," Campbell said.

"It seems like we are moving into a fairly risky environment," he added, referring to likelihood that EU countries will try to frontload their borrowings next year and see social spending rise. "I think it's highly likely that we could see some repeats of what happened in the UK".

FED UP

Wall Street futures indicated little in the way of respite later with more than 1% falls indicated for S&P 500 and the Nasdaq

Jobless claims data just out showed unemployment benefits claims fell last week, showing widespread layoffs remain low and the labor market is still tight despite the Fed's aggressive rate hikes to cool demand.

Traders will also scrutinise speeches from Fed officials on Thursday for hints about rate hikes. Regional Fed Presidents Raphael Bostic, Loretta Mester and Neel Kashkari are all due to speak.

Hawkish remarks on Wednesday had fuelled doubts about a shift in policy, with San Francisco Fed President Mary Daly - until recently one of the most dovish officials - saying a pause was off the table and that "somewhere between 4.75 and 5.25 seems a reasonable place" for the Fed to aim for with rates.

Money markets give 93% odds that the Fed will slow to a half-point rate increase on Dec. 14, with a 7% probability of another 75 basis point increase. Traders still see the terminal rate close to 5% by next summer, up from the current policy rate of 3.75-4%.

With dollar index regaining altitude, the euro dropped to $1.0335. The risk-sensitive Aussie dollar and Brazilian real both tumbled more than 1% and China's yuan weakened 0.35% as new COVID cases caused concerns that officials could order more lockdowns.

Japan's yen dipped to 139.85 per dollar, although that was still pretty close to its highest level for three months. The dollar plunged 3.7% last week when U.S. consumer inflation data for October came in lower than expected.

"Fed commentary, like the resilient spending numbers, gave little succour for anyone looking for an imminent pivot," with caution permeating markets as a result, Ted Nugent, an economist at National Australia Bank, wrote in a client note.

Asia had been grim overnight, after signals from Micron Technology about excess inventories and sluggish demand sent chipmaker stocks sprawling and Wednesday's stronger-than-expected U.S. retail sales had suggested the Federal Reserve was unlikely to relax its battle with inflation.

That all fuelled concerns about the economic outlook, with the U.S. Treasury yield curve remaining deeply inverted in European trading, suggesting investors are braced for recession.

The 2-year/10-year curve had closed beneath -60 bps for the first time since 1982 "which is concerning when you consider its historic accuracy as a leading indicator of recessions," Deutsche Bank's Jim Reid said.

Hong Kong's Hang Seng Index had closed 1.15% lower after tech stocks slumped as much as 4%. Mainland Chinese shares also wobbled, with blue chips there falling 0.5% having ripped 10% higher this month.

Japan's Nikkei had lost 0.35% and South Korea's Kospi dropped 1.4%, each led by declines in heavyweight chip players in the wake of Micron's gloom.

For the bond and commodity markets the tug-of-war between rising rates and recession risks saw U.S. 10-year Treasury yields rise from a six-week low to 3.76% and the two-year yields top 4.43%.

Nickel, copper and tin all fell heavily though as industrial metals took a battering. Gold slid to about $1,760 an ounce against a firmer dollar and oil drooped another 1% as the resumption of some Russian oil shipments and China's rising COVID cases also weighed on sentiment. ($1 = 0.8471 pounds)

(Additional reporting by Kevin Buckland in Tokyo; editing by Bernadette Baum, Kirsten Donovan)