* Oil, Europe equity futures steady after steep drop

* Euro huddles at 20-yr low; sterling squeezed

* China stocks slip on fresh Shanghai virus outbreak

By Sam Byford and Tom Westbrook

TOKYO/SINGAPORE, July 6 (Reuters) - Asian stocks fell and the dollar stood by a two-decade high on the euro on Wednesday as investors' fears deepened that the continent is leading the world into recession, while oil and European equity futures made a wobbly attempt to steady.

Brent crude futures have slid this month on worries that a global slowdown will sap demand. Prices slumped 9.5% to a 2-1/2 month low of $101.10 on Tuesday, before bouncing slightly to $103.86 a barrel in the Asia session on Wednesday.

MSCI's index of Asia-Pacific stocks outside Japan fell 1%, led by a 2% drop for Taiwan's benchmark index - heavy with growth-sensitive computer chip makers - which hit an 18-month low. Japan's Nikkei fell 1.1%.

S&P 500 futures fell 0.1% while FTSE futures and EuroSTOXX 50 futures rose 1% after heavy Tuesday selling.

News has been relentlessly negative, with talk of gas rationing in Europe, a political crisis in Britain and a fresh flare up of COVID-19 cases prompting fresh restrictions in Shanghai.

In the United States, the two-year Treasury yield has dropped below the 10-year yield, a reliable market signal of a recession capping growth in the medium term.

"The drumbeat is getting louder and louder about recession risk," said Jason Teh, chief investment officer at Vertium Asset Management in Sydney.

"Right now defence is the name of the game. It's the best strategy right now, because in a recession a lot of things can fall out of bed."

Accordingly ,the dollar has been king and a safety bid has even returned to the beaten-down Japanese yen. The U.S. dollar index hit a 20-year high of 106.79 on Tuesday, hoisted by a tumbling euro.

The index hovered at 106.440 on Wednesday and the yen rose about 0.4% to 135.39 per dollar.

The euro huddled at $1.0266 after dropping as far as $1.0236 on Tuesday and traders expect little respite. Selling could follow if Eurozone retail sales figures due at 0900 GMT disappoint expectations for a 0.4% monthly rise in May.

"There are no important support levels for EUR/USD until $1," said Commonwealth Bank of Australia strategist Kristina Clifton.

Sterling was near a two-year low at $1.1944 after the resignation of two of Britain's top government ministers put Prime Minster Boris Johnson's leadership under new pressure.

GAS GAS GAS

Uncertainty over Europe's gas supply is leading the latest round of worries, and has sent prices rocketing against slumps in other commodities on growth worries.